Things You Ought To Know Before Applying For A Credit Card
This article is posted under Personal Finance.
I love credit cards and I couldn’t imagine my life without one.
Yes, it may seem odd to read this from a personal finance blogger when many others have written how evil credit cards are.
Personally, I believe that anyone who holds an aversion towards credit cards are missing out on one of the most practical financial leverage tools available to us.
First, let me emphasize on the word tool. The dictionary defines that word as a device that helps us perform a task. In a sense, that’s what credit cards do, it assists us in paying for our purchases.
It provides safety and convenience so we don’t have to carry so much money in our pockets, specially when we’re off to buy something expensive. It gives us breathing space in our budget through installment plans and deferred payments. At times, it has helped me save and make money as well.
However, I believe that credit cards are NOT a necessity in life. Although I said that I couldn’t imagine my life without one, it doesn’t mean that I couldn’t really live without it.
Here’s an analogy; consider one of the most basic tools of a carpenter – the hammer. If he needs to drive a nail into a plank, using a hammer is the easiest way to do it. Nevertheless, the same task can still be accomplished by simply using any heavy object. Yes, it can be awkward and more tedious to use a rock to drive the nail, but it gets the work done, which is what’s really important.
So how about credit cards? If it’s not a necessity, then how do you build a good credit history to qualify for loans? How do you shop online? What will I do if I have a financial emergency and I don’t have money?
Let’s take a look at these various situations and find “the rock that can replace the hammer”.
A few months after I started working, I remember my father saying to me that I should apply for a credit card so that I could begin building my credit history. When I asked why I needed to do this, he said that it will help me financially in the future.
A good credit score could mean lower loan interest rates, quick mortgage application approvals and many others.
Although these are true, fact is, you can acquire a good credit history even if you don’t have a credit card. You can do this by simply paying your bills on time. A collection of regularly paid billing statements can be used as proof of your financial stability.
Moreover, it may be difficult at first to secure a loan, but once you do and are able to pay the bank adequately and without miss – your reputation as a prime borrower increases. That and your credit score as well.
A few days ago, a friend of mine asked if he could use my credit card because he urgently needs to buy something important online. I was surprised to learn he doesn’t have a credit card anymore. He said that he canceled all of them after he paid all his debt early this year.
This concerned me because I know how much he relies on his credit card to buy things online for his freelance projects. He said that he’s been using the credit card of his father, which as of late, got a little annoyed from his constant borrowing and suggested that he get a new credit card for himself instead.
Fortunately, debit cards are now available for everyone. I explained to my friend that he can easily apply for one in his bank. This nifty tool can actually do almost everything that a credit card can, except spend money that you don’t have – which is not necessarily a bad thing.
In the Philippines, I know that VISA debit cards can be acquired from Equitable PCI Bank, Union Bank and Chinatrust Bank while MasterCard debit cards are available from Banco De Oro.
This happens to all of us. Unforeseen circumstances do occur when we need money and we don’t have any in our pockets. In some cases, having a credit card could be a real life saver. In most situations though, having an ATM card is all that’s necessary.
You underestimated your budget when you went out? You realized that the money you brought is not enough to buy the item you need? Just head off to the nearest ATM machine and withdraw some cash.
But what about other more serious financial emergencies? I believe that this is where paying yourself first really pays. We should all recognize the fact that life can be unpredictable and this is why we need to consciously save money for the “rainy days”.
Having an emergency fund is the smarter choice here and I believe that if you don’t have the discipline to build one, then it may not be wise for you to own a credit card.
Still Thinking of Applying For A Credit Card?
I believe that the only valid reason why you should get a credit card is because you want to use it as financial leverage.
So before you go and submit that application form or use that pre-approved credit card that was mailed to you. Ask yourself first these questions and see if you have the proper mindset and skills to handle this power tool.
- Do I have the discipline to track my expenses?
- Can I resist the temptation of buying on impulse?
- How will having a credit card change and affect my current lifestyle?
The last question is something you should thoroughly consider. It is imperative that you have full understanding of how you can use credit cards to your financial advantage. Just like a hammer can hurt you with one careless strike, misuse and abuse of credit cards can drive you down into a pit of debt and pain.
There’s so much more to say and discuss about credit cards. Fortunately, this is just the first of a series of articles that I will write about this topic.
If you are already in deep credit card debt and you don’t know how to get out of it, then I suggest that you subscribe to Ready To Be Rich so you won’t miss out on that future article.
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