The shocking truth about credit cards

The truth about credit cards






A good friend on mine, Albert, wanted me to feature what I think of credit cards in the Philippines. His questions vary from why do Filipinos seem to be in love with credit cards to how credit cards work to how to get out of credit card debt. More importantly he asks, what are my personal experiences with credit cards.

Albert, here’s for you.

My story:
1 year into my regular employment, I began noticing my co-workers getting their credit card applications approved left and right. One girl actually purchased a new cellphone from it right away. One guy actually even told me that he knew of people “making money” from credit cards by overlapping bills and withdrawing from credit cards to settle payments.

Young, innocent and stupid as I was, I began envying these guys. Soon enough, I was applying for a card myself. 2 failed tries and a year after, there it was – my very 1st credit card. The initial CL (credit limit)? P20,000.
Fast-forward 10 years later:
I still have 1 credit card. It’s the same one that got approved 10 years ago. It’s from the same bank. And it’s still worth only P20,000. The unpaid balance to date? Somewhere around P2,000, including this year’s annual membership fee of P1,500.

I guess I was just lucky. Or just plain kuripot. I didn’t get too much tempted to use the credit card all these years. I remember using it for large purchases (appliances) when I got married, but completely paid it off in about a year. No, I didn’t know too much what the credit card trap meant. I wasn’t as well-informed as I am now. Like I said, I was just simply lucky.

Now here’s what I learned over the years:

Yes, you can live without credit cards.
Yes, credit cards will work for you only if you have the discipline to pay your loan off in equal installments.
No, there is no way you can make money out of credit cards. The interest rate is way too high for anyone to afford it.
No, it is not wise to have the biggest credit lines, or multiple cards. These are all temptations.
I remember one cozy night me and my wife were talking about credit cards. Our discussion ended with us both sighing “ The credit card is the devil”. Of course, it was just a metaphor. But you get the message.

And so I lecture today:

When in deep credit card, gather your wits together and start paying off. There is no way around it. None. Just set a portion of your income every month and pay directly to your bank.

Credit card companies DO NOT want you to pay big chunks. It’s a not-so-secret- secret: They need to make money from you paying off only your month’s interest. So do yourself a favor and stop being nice to them.

Stop collecting credit card accounts. I promise you, this habit will take you directly to the trap.

Maintain only 1 credit card. The one with the smallest interest rate.

Pay only for stuff your cash on hand will permit you to. Stay away from credit card points. These are temptations. Remember the devil metaphor?

So there.

Be wise, people.

Being informed is key.