The way I see it, persons should be very careful with the use of credit cards.
As a matter of fact, the sooner people recognize that whenever they swipe a CREDIT card, that they are not spending their own money, I want to believe that they will be a lot more conservative in its use.
I read a report during this week which gives some alarming information out of Trinidad:
“Trinidadians have been swiping their credit cards more than ever. Managing Director of RBC Royal Bank, Darryl White estimated that credit card usage went up about ten per cent.
The CBTT’s survey, which covers the broader financial system, reported a rise in credit card balances from 3.9 per cent in 2015 to 13.7 per cent in 2016.”
Basically, what the report is saying in a nutshell, is that loads of people in Trinidad and Tobago owe huge sums in credit card debt.
Now I am yet to see a similar report on Nevis but I have been told that some folks here on our beautiful paradise isle, have also wreaked up some huge credit card debts.
The sad news is that when you owe the bank for more than a month, the debt will incur interest.
Some banks, at a rate of 19.5%, up to 21%, annually. That brings it to an average of 1.625% monthly. Now, remember that the interest becomes more telling, depending on the amount borrowed.
Now, to the best of my knowledge, it is illegal for persons who sell alcoholic beverages to sell alcoholic beverages to individuals who are already obviously drunk and so I asked a bank official, why would they continue to allow persons who are always in debt with the bank, to use their credit card.
She explained that the Bank exhibits compassion by calling after the first month; writing to the individual by the second month; writing again by the third month and by the fourth month and the matter is still not sorted out, well, they will discontinue the card and take the person to court, if needs be.
Now, my research reveals that some of the items that people will most likely use a credit card to purchase are vacation packages, which included cruises and/or hotel rooms; household items such as washing machines; stoves; refrigerators; televisions; watches; computers and other technological gadgets.
Now tell me, which of these items we absolutely cannot live without—IF WE CAN’T AFFORD IT?
Well I newa!
I was not too bright in school, but it appears to make sense to me that if you cannot afford it or afford to pay within reasonably quick time, we should leave the people’s credit card alone.
I use a credit card sometimes, for certain business transactions but more especially when I am overseas. It helps me to walk around with limited cash but I would have saved up the money that I require for the said transactions and try to repay within the same month of my return to the island.
The Bankers though, will tell you that there are some logical reasons for using a credit card:
1. Signup Bonuses
The standard debit card offers zero rewards or very small rewards. Many credit cards, however, offer significant rewards when used responsibly.
2. Cash Back
If you sign up for the right credit card, you can earn anywhere from 1% to 5% back on your purchases.
3. Investment Rewards
Some cards, offer a higher rate of cash back; in exchange you must deposit your cash back directly into an investment account.
4. Frequent-Flyer Miles
It seems like every airline these days has at least one credit card available. Cardholders rack up miles at a rate of one mile per dollar spent, or sometimes one mile per two dollars spent.
Many card rewards work on a point system where you earn up to five points per dollar spent.
Paying with a credit card makes it easier to avoid losses from fraud. When your debit card is used fraudulently, the money is missing from your account instantly.
7. Grace Period
When you make a debit card purchase, your money is gone instantly. When you make a credit card purchase, your money remains in your checking account until a couple of weeks later when you pay your credit card bill. Hanging on to your money for this extra time can be helpful in two ways. First, if you pay your credit card from a high-interest checking account and earn interest on your money during the grace period, the extra interest will eventually add up to a meaningful amount. Second, when you always pay with a credit card, you don’t have to watch your bank account balance like crazy to make sure you stay in the black.
Most credit cards automatically come with a variety of consumer protections that people don’t even realize they have, such as rental car insurance, travel insurance and product warranties that may exceed the manufacturer’s warranty.
9. Universal Acceptance
Certain purchases are difficult to make with a debit card. When you want to rent a car or stay in a hotel room, you’ll almost certainly have an easier time if you have a credit card. Also, when you’re traveling in a foreign country, merchants won’t always accept your debit card as payment, even when it has a major bank logo on it.
10. Building Credit
If you have no credit or are trying to improve your credit score, using a credit card responsibly will help your credit score because credit card companies will report your payment activity to the credit bureaus.
However, we must take note of the following, if we use our own cash instead:
1. Purely Psychological. Credit cards make it too easy to spend money.
2. Easier to budget for discretionary spending. 3. No consumer debt. If you use cash, then you won’t have a problem with consumer debt.
4. Delayed gratification. When I need to make a larger discretionary purchase, I have to save up for it. This delays the purchase and many times, I found that I didn’t really need it after all. Putting off purchases also give you time to research for a better product and deals.
5. Less guilt. When I have cash left at the end of the week, I don’t feel guilty about spending it on myself. Sure, I can save it too, but usually we just go out for happy hour or something like that.
6. Change jar. This is a small side benefit. I hate carrying coins and I always put them in a change jar when I get home. Some people refer to it as a PIGGY BANK. ( I wonder why PIGGY though-why not DOGGY or MONKEY)?
This is a side saving that builds up over time. It’s always a nice little surprise when we drop by the bank to deposit it.
7. Cash is not traceable. Your credit card purchases can be easily tracked. “
Now I can’t help but conclude with what the bible says about credit cards. Oh you did not know the bible speaks about credit cards huh?
Pay back every penny! The Bible is clear that when we do decide to take on debt, we are to pay back what we borrowed! In Psalm 37 we read: “The wicked borrows but does not pay back…” Or how about Ecclesiastes? “It is better that you should not vow than that you should vow and not pay.”
I once met a Christian brother ho told me that he had just received a loan but he had no intentions of paying it back….because Jesus is coming soon.’
Well I newa!
In Luke 6:34 we read: “And if you lend to those from whom you expect to receive, what credit is that to you? Even sinners lend to sinners, to get back the same amount.”
The wicked borrows but does not pay back, but the righteous is generous and gives;
Be not one of those who give pledges, who put up security for debts. If you have nothing with which to pay, why should your bed be taken from under you?
Somehow though, I think that I want to finish with this one from Proverbs:
Go to the ant, O sluggard; consider her ways, and be wise. Without having any chief, officer, or ruler, she prepares her bread in summer and gathers her food in harvest. How long will you lie there, O sluggard? When will you arise from your sleep? A little sleep, a little slumber, a little folding of the hands to rest.
So it appears to me that working hard for what you want and saving well so that you can use your own money when you need to, is the best way to go.
That’s the way I see it. How do you see it?