Credit Cards

I had my first credit card way back in 1987 when I was doing my post graduate degree at the young age of 24. It was a Citibank Visa card and soon after I applied for Citibank Mastercard followed by American Express. Then I applied for two more departmental store cards, Macy's and Emporium Capwell. The credit limit for each card wasn't much but for a young immature guy like me it was enough.

When I started work I applied for a few credit cards and that was when all my financial troubles began. Being utterly foolish I paid the minumum required payment, charged more than the minimum payment and eventually I 'maxed' out on all my cards. One card I remember I 'maxed' out without even paying a single sen. Not that I didn't know it was an unwise thing to do, I just chose to ignore the truth, the real fact. People from the banks frequently called me at the office and at home. One came to my office a few times. Caller ID was not in existence during that time so I had this gushing fear whenever the phone rang at my house. I do still have this fear but for different reasons. Eventually, with a lot of prayers asking God to show me the way to get rid of all my debts, I paid all the outstanding balances on my cards. I got rid of all my cards and did not posses a single credit or debit card for about 6 - 8 years. Now I have a few cards but I'm at least wiser from the lessons learned.

Here are my thoughts on credit cards to remind me on how I should handle them. All of these thoughts are common sensical but in the past I tend to ignore them:

• Pay in full, do not pay the minimum. If you can't afford to pay in full, pay more than the minimum. If not, don't charge the card on things that you do not need. If you chose to go for the 0% payment scheme, make sure you pay the monthly installment in full and perhaps pay a little bit more. If not the scheme is meaningless.
• Always remember that the cards represent the cash that you have. It is not a pre-approved loan, money that you don't have
• Make sure that you have more money in your savings than the combined credit limit of all your cards.
• When you purchase something which cost let's say RM2500 using a card, immediately pay the amount the next day. Do not wait for the bill.
• Try not to use the card especially when paying for food. Better still try not to use the credit card at all. Use it only for emergencies.
• Never take out cash from your credit cards. The interests are just TMTH (too much to handle).

Watching the Suze Orman show I gathered that many Americans owe credit card companies big time. Some Americans spend more than what they earned. Especially in big cities people are trapped into living a lifestyle that they can't afford. They use credit cards even to pay for their coffee. It's like a must that they have to eat at fancy restaurants and buy designer clothes even when they can't afford to. They can't get breakfast for less than $5. Unlike in Malaysia, we are very much contented with a RM 4 breakfast.

I have a friend who took out a RM10,000 cash advance from his credit card to invest in a forex scam. He lost all his money and soon after he lost his job. Took years for him to pay back the money because of the interest incurred.