Credit cards can be a good tool for you to use to manage your finances. They can also create financial chaos if you fall into the trap of using credit cards to satisfy every whim. The secret is to use credit cards wisely or not at all.
Use them don’t abuse them.
When people pay for purchases with credit cards instead of cash, they spend about one-third more money, because credit cards don’t feel like real money. It’s just plastic. So it is easy to buy what you see, but don’t necessarily need. Racking up credit card purchases can quickly get you into trouble if you are not paying the balance in full at the end of each month. It does not take long for interest charges to multiply your outstanding balance to the point of no return.
Paying interest on credit card purchases is a waste of money. If something is too expensive for you to buy, and you use your credit card to make the purchase, and you carry a balance from month to month, you may end up paying multiple times more than the purchase price for that item you thought was too expensive!
The average American has about $16,000 in credit card debt. If you have an APR (annual percentage rate) of 18% on your credit card, you are paying about 0.049% in interest every day. If you start the month with an outstanding balance of $16,000, every day you are being charged roughly $7.84 in interest. In a month that adds up to $236.88. In a year your interest payments will add up to $2,822.40 if you aren’t making significant progress paying down the balance. Surely you have better things to do with almost $3,000 than give it to the credit card company in interest payments. Paying interest on credit cards is simply a waste of money. It’s making the credit card company rich and draining away your financial success.
Sirach 20:12 sums up interest payments in this verse, “There is one who buys much for little, but pays for it seven times over.” The longer you keep an outstanding balance on your credit cards, the more likely it is that you will be paying seven times the purchase price for whatever your charged on your card.
Using credit cards wisely means only using credit cards for budgeted items. It is important to your financial future to pay off your credit card balance every month and avoid interest charges. This is where a budget is used to help you manage. On the same day that you charge something on your credit card, deduct the amount from the appropriate budget category. You spent the money via your credit card, so it is no longer money in your budget that is available to spend. This way, the money to pay off the credit card will be available at the end of the month and you will not be digging a debt hole that you may not be able to escape.
If you are tempted to use credit cards for an unbudgeted purchase, use a “Wish List.” Write down the date and the item you want. Get three prices. Wait 30 days. If you still want the item after 30 days AND you have saved the money in your budget, go out and buy it. If something else comes to your attention that you want to buy before the 30 days is up, cross out the first item. Write down the second item you want along with the date. Get three prices. Wait 30 days. If a third item gets your attention before the thirty days is over, start the process all over again. Cross off the second item, write down the third item … This is a sure way to stop those impulse purchases that turn into budget busters.
Destroy your card the very first time you have a credit card bill that you can not pay in full the month the bill is due. Use one of our proven strategies. Cut it up into little tiny pieces or put it through the shredder. Put the credit card in the oven at 3500 for half an hour. Or freeze your credit by sealing the card in a plastic baggie, putting the baggie in a bowl, filling the bowl with water and putting the whole thing in the freezer.
And always pray and ask for strength to follow through with your efforts to get out of debt.
The best way to avoid financial problems is to avoid the situations that are most likely to cause financial problems. For most families, the primary cause of
financial problems is the misuse and abuse of credit cards.
If you fall into credit card abuse, it is in your best interest to function without them. Being disciplined and paying the balance in full each month will ensure that your credit cards will not be abused.