Credit Cards and You
Debt is not necessarily a bad thing to have, and the same is true especially for credit cards. Some financial experts may shun them but the truth is, credit cards play an important role in the efficient management of one’s finances if they are utilized correctly and prudently.
For one, credit cards offer payment convenience and security especially when travelling. For people who work in sales and require representation expenses, credit cards provide a quick, easy and discreet way to pay for a client’s meal or a quick out of town trip.
Almost all credit cards these days also offer some form of rewards system where continued use racks up points that can be used for prizes, perks or discounts. These can be gratifying and can save cardholders substantial money in terms of groceries, supplies or even travel.
The key is in managing credit card use. The cardinal rule is to treat credit card as if it were cash. Pay off the monthly amount due in full as much as possible. If not, be aware that any balance payments accrue interest on a monthly basis based on the rate dictated by the credit card provider or bank.
Credit cards are helpful in managing immediate or short-term cash flow situations. Credit cards become a problem when people use them as if it were free money. Some people also get into a vicious cycle of borrowing more money in order to pay off previous debts.
Always keep in mind that credit card is a form of debt, and acquiring debt comes with the responsibility and accountability to pay for it eventually. When credit card debt becomes out of hand, it is not only a financial problem. It potentially affects all other areas of one’s life, such as work and relationships.
While some people are brazen enough to run away from credit card debt, they don’t realize that this will affect their credit rating and may make them ineligible to avail of major financial products and services later on such as housing or car loans.
In order to successfully get out of credit card debt, one needs to immediately stop using the cards and get on track toward achieving a positive cash flow. This can be done by cutting back on unnecessary expenses and saving more money that can be used to pay off the debt little by little. It would also be good to engage the help of a financial professional who can provide sound advice on how to pay off debt strategically. One can talk to the bank or lender and come up with a compromise agreement on how to pay off the debt.
Again, keep in mind that debt is not necessarily bad. Large corporations and businesses—even governments and entire countries—run on debt. What’s important is to manage debt well and to maximize its benefits and advantages.