We all hear stories about using and misusing credit cards, and often, we wonder how one can use a credit card responsibly. A credit card is a big responsibility. It takes more than being aware that you can manage it properly, more than knowing you can potentially get in trouble if you can’t handle it.
A credit card is a big responsibility. It takes more than being aware that you can manage it properly and knowing that you can get in trouble if you can’t handle it for one to handle it properly and avoid bad debt.
Read more: Credit Card Dos and Don’ts for the Financially-Savvy Filipino
Stories from other people can help inform one’s decision to use their credit card. Note that their names have been altered to protect their privacy.
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What Happens After You Get A Credit Card?
“I’d never really used my credit card for anything beyond small, insignificant purchases that didn’t amount to much. But then I’d gotten plastered after a bad breakup, and in that drunken state… I’d decided that the four years we’d spent together were four years that I spent giving her all of my time, leaving nothing for myself.
I probably shouldn’t have started the drinking early on in the day, and not so close to a mall. My friends said that I was lucid and I seemed to know exactly what I was doing. Next thing I knew, I’d gone home with a forty-inch flatscreen and a new console, and a bunch of games.
I was lucky that the TV and the console came away on an installment plan. I was stuck paying off a large amount of money for the next half a year, because the games weren’t part of the plan, and were on top of the purchase.”
There is a clause when it comes to purchasing big-ticket items with a credit card. Protections are in place against fraud, and the ability to dispute a charge if there is an error. Some cards may even offer extended warranties on certain items. If a card is enrolled in a rewards program, you may even get rebates or freebies.
Home Out of Range
“Everyone wants a home of their own, right? We were looking into getting a home loan with the bank where my credit card was enrolled – and this was before all the home loans programs carried more accepting terms and conditions. I splurged on a few purchases earlier on in the year, which left a large balance on my card. Naturally, I was still paying most of them off.
I didn’t have any idea that the bank would be looking into those records, given that I happened to the bank with them all the time. So I was a little surprised when my application was denied. Turns out it was an issue at the time, having a balance on your card when attempting to get a loan as it can be taken to mean that we’d have a hard time paying off the balance. We had to wait until the balance was cleared before applying again.”
Banks generally require that a person should be in good standing when it comes to their finances before they approve loans, to ensure that their applicants will have the ability to pay their mortgage in a timely fashion.
Quality Education at a Premium
“When I wanted to go back to school to work on my M.A., I thought it’d be a great idea to use my credit card to pay off my tuition for the semester. I mean, I had the ability to pay it off as soon as my money came in but it was the last day of enrollment and I really just wanted to get it all out of the way.
I didn’t realize that I’d go over the limit on my card, so – uh, oops – I got into the program I wanted later than I wanted. I’d never really checked my maximum credit line, as I rarely ever used my card. I suppose that’s the lesson to take away from my end: always check your available credit before making a purchase.”
Most banks often raise a credit limit if the card’s owner keeps up with the payments. It’ll probably be best if you check your limit in advance.
Overall, there are times when using your credit card is just a bad idea. If you can manage a card properly, it’ll work to your advantage given the rewards that come as a payoff for paying your balances off and ensuring you stay in the black.
Having a good credit rating will come in handy, even if you don’t plan on making big purchases immediately.
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With a goal to help Filipinos lead healthier financial lives, Moneymax regularly publishes tips and tricks on personal finance and lifestyle, among many other topics. For more finance-related news and articles, follow Moneymax on Linkedin.