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Using Credit Cards Wisely

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Is there really a way to use credit cards wisely? No! I am sure many people will disagree with me and that’s ok. You have the right to disagree with me. But before you decided that my opinion is obsured or uneducation listen to why I have come to this conclusion.

Let’s first image life with out credit or any sort of money borrowing. What would you do if you could not borrow money? Would life be really horrible if you could not have things instantly but instead took planning and saving. I think many people would say yes life would be horrible if this were the case. I don’t know that I can change the minds of people with this type of mentality but I would like for you to humor me for a minute and ask yourself this question honestly.

Does it feel better to buy things with cash that you know you have set aside for an item or to buy the item using a credit card or borrowed money?

It’s a simple question but if you are serious about change it requires an answer. If your answer was yes it feels better to buy with cash then why not just buy with cash (or debit card)all of the time. Yes, it would require intentional thought and the dreaded word,  ”budgeting“.  But the sooner you decide your are going to take your money management seriously the sooner you will gain financial freedom. The sooner you decide that using credit cards is not wise money management the sooner you will be debt free.

More than likely I will get one of those “I pay it off every month” readers. Ok, you pay it off. Why not just pay for it and not risk the possiblity of forgetting to make a payment or having to pay for an emergency instead of your credit card balance. You can play the “I’ll pay it off every month” game but one of these days it will bite you in the butt.

 

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January 12, 2007 | Filed Under Credit Card Use, Financial Advice 

10 Responses to “Using Credit Cards Wisely”

  1. Golbguru on January 12th, 2007

    I just might be that guy in the picture you have there :) …yeah I would disagree with you there.

    But I agree with you in a certain way. To extend you analogy, if people are not sure they can run faster than the “butt-biting” dog, they should not step in it’s way. Simply put, those who are unsure about how they will manage credit cards…should avoid using them altogether.

    Btw, thanks for leaving the comment on the Dave Ramsey article. I encourage people to disagree and raise questions….it helps in better understanding :)

  2. Mona on January 13th, 2007

    I am not surprised you disagree. I just don’t think the game is worth playing. Why risk the accidental foul-up and get bitten. I guess we all have to make our own choices. Just make sure that if and when the day the dog does catch up with you, you visit a sound financial couselor like Dave Ramsey :o ). Thanks for commenting.

  3. Aggie on January 13th, 2007

    I found your web site thru Blogitive, but I was drawn with your articles. It is extremely helpful. I have linked your blog in a post of mine and I plan to read more about your posts. Thanks.

  4. Mona on January 18th, 2007

    Thanks Angie,
    I am glad you like my blog :)

  5. Paul on January 22nd, 2007

    I use a Lowes credit card to finance property improvements. They will give me a one-year “no interest” plan to finance large purchases. This works for me because me real estate investment plan is to sell the property within one year and pay off the card before the accrued interest charges hit.

    For luxury items or essentials, I agree 100% – don’t use a credit card.

  6. Debt Hater on January 23rd, 2007

    This week’s Carnival of Debt Reduction …

    WELCOME TO THE CARNIVAL! The newest Carnival of Debt Reduction is up and ready for your perusal. This Carnival is interesting because there are a lot of posts about how debt maybe isn’t so bad (ironic considering the name of…

  7. Mona on January 24th, 2007

    Hi Paul,
    Thanks for commenting. Many people feel that by using credits that offer a 0% intrest rate for a period of time they are beating the system by borrowing money for free. When debt was a way of life for me my husband and I we would jump at these opportunity. We never had a problem with paying the balance off before the end of the 0% rate because we usally would just find another credit card to transfer the balance too ( another way to beat the system). The problem with this type of thinking is that we are taking on an “I’m invisible” sort of approach to building wealth or obtaining stuff. We are assuming life will go as planned (which rarely happens) and we will be able to pay off the debt by the time to promotion is up.

    It sounds like you would have a lot to loose if you were not able to pay off the debt with the sale of your real estate investments. I think we all know that real estate is very unpredictable especially in short term. Anything could happen to the market within a year. I believe real estate is a great way to invest if you have the cash to pay for it or if it’s your residence to take out nothing more than a 15 year loan. Real estate will always go up if you wait long enough so I see real estate as a long term investment.
    Dave Ramsey has some very good advice on this subject. He became a millionare in his twenties through real estate investments and lost everything once the banks asked for their money back (this was during the real esate fall in the early 90’s, I believe). If he had owned any of his investments out right then this fall would have had virtually no effect on him. Not to mention if he had sold any of those properties now he would have made a killing.
    So I know you didn’t ask for my advice but I am going to give it anyway ;) . Re-think your investment tactics. If you continue using credit cards even for investments you will loose the game one of these days. Actually my belief is that even if you are profiting from you investments you are already loosing the game by using borrowed money.

    I believe that borrowing money in any way shape of form is something we should all be trying to avoid. Whether it is for personal items, business investments, business supplies, college tuition, cars, houses it is all still DEBT. And I believe DEBT will robe you of any dreams to gain Financial Freedom.

  8. Gaida on January 27th, 2007

    Hi Mona,
    I certainly agree with you that you have to decide to take your money management seriously, the sooner you will gain financial freedom. And it sure has a sweet feeling.

    I must admit I’m one of those ‘pay it in full’ every month & it has never bitten me in the butt. I find this can sometimes be quite an eyeopener each month when the bill comes in. It helps you see at a glance how much it costs you to live each month.

    My card is linked to a points system & this then helps me pay for my groceries as the points grow, which I find an added bonus. Must admit I’m pretty disciplined in my spending.

  9. LivingAlmostLarge on January 30th, 2007

    Interesting, I have a CC that has no late fee, although it would accrue interest if I were late. I’m of the pay it in full people.

    But when I was really broke, I still used CC because of the rewards. Instead I treated it like a checking account, every item was listed and budgeted. Then from my set amount I deducted every charge. I never overspent because every dollar had a name.

    Still does. But now it’s a little more generous and I don’t use a check register to budget. Now I just know what I can spend and what I can’t.

    But even when broke I was a terrible budgeter. I had to always backwards budget, meaning I had to set all bills up then decide what to save first then see what I could spend. So basically I was a “cash” only system in that, the cash was sitting in a bank account waiting to be deducted in my register. I earned a bit of interest on my cash and a bit of rewards on my CC.

    But I know I’m an exception and not the rule. I tell others don’t do it. But I also play with 0% financing. Done it with home depot and Best Buy, in fact I have it going right now. But I just again sit the cash in the bank and monthly pay it off until the month before it’s due.

    It’s not a good method for MOST people. Too many people overspend period. But that’s rooted not in CC use, but a person’s relationship with money.

  10. Mona on January 31st, 2007

    Thanks for commenting Gaida and LivingAlmostLarge. I understand that there are some that really do use CC with a lot of discipline and strategy. And of course you are completely entitled to your own opinion. Our family has decided not to take the risk of using CC. If you think there is no risk I think you are fooling yourselves.
    One way to look at is this. Many people don’t wear seatbelts even though the law says you must because it is safer for you in case you get into an accident. Many people live their entire lives without getting into a life-threatening accident. They feel they are good drivers and will be careful. From time to time they make mistakes and get into fender-benders and are right back on the rode the next day(small mistakes in money management, missed payment, etc). But those that do get into serious accidents are usually badly injured or killed. No amount of carefulness could prevent other people making mistakes or unforeseen events from happening to cause the accident (emergencies, lost jobs, serious health problems, becoming disabled).

    The point here is we have no way of knowing the future events in our lives. Why risk having debt robe us of our financial freedom? When you have no debt, no payments, no weight hanging over your head then you are truly financially free. You can choose not to wear your seatbelt but you may regret it one day when that unforeseen accident causes you to loose control.

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