Credit Card

The ads are always very sexy. They tell you that you are special, you deserve all the best things in the world and you can have all of them right NOW if you just apply for that special credit card.

The next thing you know, you have chronic credit card balance disease and it’s eating away at your financial health.  

Here are 10 tips to keep your financial health in check as you get ready to swipe the card:

1. You Don't Deserve It


Once you buy into the notion that you deserve it, whatever “it” is that you want, you start to rationalise for it. “Why shouldn’t I buy that, I have been working so hard!” “With all this nonsense I have been taking from my boss, I deserve to give myself a break.” And of course, “You only live once, don’t be so hard on yourself”. But seriously, more credit cards don’t make you more successful.

2. Money You Have Not Earned

Never spend money you have not earned!
Always think of your credit card simply as a convenient way to pay for something and use it only when you are very confident that you have enough money to pay the bill at the end of the month. If you can only pay part of the bill, it means that you have spent more than you should. You need to know that the interest rates on the credit card balance are very high (some at more than 24% per annum) and if you keep accumulating balances, more and more of your income and money will have to go towards servicing the interest payments, which is money that the banks make for which you get nothing in return.

3. You Don't Need It Now 

“I can pay 20% over 5 months” – This kind of thinking is also about immediate gratification and incurring debt for the future. It is better to save the 20% every month first and then buy that thing that you want five months later. Then, you would be buying something with money that you have. Studies have shown that being able to delay gratification is an important trait for overall success in life. 

4. Not More Than Two

Never have more than two credit cards. At most have one Visa and one Mastercard in case the Visa machine breaks down at the shop. The more cards you have, the more you will pay in annual charges, which can run into the hundreds and even thousands of dollars.

5. You Don't Buy That Much

“I can get 2% rebate on groceries on this credit card”. Do your sums. Avoid all the specialty credit cards that promise special discounts. For example, a grocery chain that you shop infrequently at may have a credit card that offers 2% rebate on the groceries. However, this comes with an annual fee of $250. In order for the 2% rebate to be meaningful, you would have to buy $12,500 worth of groceries from that chain, or about $1,000 a month. Do you buy that much? If not, it is better not to apply for the card.

6. That Annual Fee

As a rule, always get out of paying the annual fee. Ask around and you will find that some banks are more open to waiving the annual fee than others. Cancel all cards that refuse to waive the annual fee. There is no loyalty reward for staying long with a credit card. Most would offer an annual fee waiver of two or three years when you first apply. Take advantage of that and then cancel that card after the waiver period is over. You might think it is troublesome, but is filling in a form that takes you 10 minutes worth saving $250? If so, apply again. If you look upon $250 with disdain, then don’t.

7. Giro Those Telco or Utility Bills

Do not put your telco bills or utility bills on your credit card. This will tie you in and make it very hard for you to cancel the card if you need to. You would have a lot more parties to deal with when you want to cancel a card. It is better to GIRO those bills.

8. Pay On Time

Always pay your credit card bill on time. If not, penalty charges of $50 or more apply. That’s a lot of money to pay for ill-discipline.

9. Make That Claim

Always claim your credit cards rewards points. Some expire and some don’t, so be alert for those that expire and be sure to claim you rewards before the points expire.

10. Resist Sexy Ads.

The commercials always show that the people are so impressed with the guy bearing a certain card. The truth is, no one cares what card you are carrying. You are just another nameless, faceless customer who needs to pay a bill. Get over it. Don’t get suckered into paying all those unnecessary fees.

Tips on Choosing The Right Credit Card: