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Money Matters

Important Things You Need To Know Before Getting A Credit Card

This piece of plastic can be your friend, but if used irresponsibly, it can be your worst nightmare

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Original Article: Tisha Alvarez Angluben Photography: FreeImages.com/Lotus Head

It is so easy to make purchases just by swiping a card on a machine. It can make you feel like you can buy anything you want—after all, you’re not pulling wads of cash out of your wallet. This feeling of euphoria lasts, until your monthly billing statement comes in. If you weren’t careful with your purchases, the amount you’re billed with will shock you. And if you can’t pay the amount in full—or worse, you can’t pay any amount on your due date—the nightmare will start.

Keep yourself from spiraling into debt. Here are important things to keep in mind:

1. A credit card is a convenient tool, as long as you use it responsibly.

When you have a credit card, you don’t have to bring a lot of cash with you. And in times of emergency— like, say, you need to buy medicines or anything of importance pronto—and you don’t have cash on hand, you can use your credit card to buy what you need. However, keep in mind that when you use your credit card, the bank charges you not just with the amount you spent, but also a monthly interest of 3.5 percent and membership fees, to name a few. 

2. As much as possible, pay your balance in full, no matter how tempting it is to pay off just the minimum amount.

When you pay only the minimum amount—or worse, when you don't pay anything at all on your due date—banks charge you compound interest, which is actually equivalent to a 34 percent interest rate a year (which you just don’t pay all at once, so you’re not aware that it’s actually that big). So the best thing to do is always pay the full amount that you owe the bank, or, if it can’t be helped, pay off the minimum amount at the very least. Don’t skip a payment altogether, because if you do, the amount that you would have to pay in the succeeding months will balloon. A retired company officer explains that this amount is “five percent total amount due, or P500, whichever is higher, plus past due amount, if any, plus late charges, if any, plus over limit amount, if any.” 

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3. When you fail to settle your credit card bill, you will have to deal with demand letters, constant calls from banks, or members of a collection agency knocking on your door.

This can cause so much stress and might even put a strain on your marriage or your family. Usually, if you’re not able to pay after 90 days past your due date, your account goes to a collection agency (a separate entity from banks). Still, you must stay calm when this happens. Plan your finances so you can settle your debt as soon as possible. 

More on Realliving.com.ph

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