What is common about sex, money and religion? Everyone feel strongly about them but find it hard to talk about them. Well, I am talking about money here. There are lot of experts to help out the big organizations when it comes to financial decisions, so they are fine and can be left on their own. But what about common people like you and me?
I was stupid to get myself a credit card when I was younger. I succumbed to the lure of credit cards. The power to purchase something that appeals to you is intoxicating and can be dangerous. I was young and there was no one to give me any advice on financial matters. Soon one purchase led to another and I developed the habit of mindless consumption even though I did not have the money to buy. Credit cards force you to quickly shift your buying ethics from moral to amoral. You start to buy things just because you want them and not because you need them. You start to think – ‘It’s OK to buy this time and I will pay it off slowly’. Soon that thinking changes to ‘I can still pay the minimum due.’ In no time you end up in a spiral of ever increasing debt thanks to the magic of compounding interest.
Some people will tell you to outsmart the lenders and look for options to consolidate your funds – for example Balance Transfer. That means you take another credit card and use it to pay off your existing credit card debt. You are deliberately made to think that you are getting a good deal, for instance a lower interest rate for one year or so. People are too gullible and fall for it. It does not free you from debt! You just get deeper and deeper into the rabbit hole. Do you know why? Because you become comfortable being in debt. That is the danger zone. You must avoid it.
Some may argue that if you know how to manage your finances, debt consolidation can really help. Theoretically, it might be possible and a handful of people may even be able to pull it off. However, I still do not endorse this because a vast majority of the people are unable to manage their finances and control the urge to utilize their spending power. As much as we would like to think that we are smart and are in control of our spending habits, the truth is that we are not.
Here is the best advice on personal finance – Stay away from credit cards.
If you want to buy something, save money for it and then buy it. Otherwise, the magical power of compound interest will destroy you perpetually and fill the coffers of your lender with your hard earned money. On an average, credit cards will charge you 2.5% interest monthly – that translates to approximately 30% interest in a year. Let’s say you buy a cool mobile phone with your credit card for 25000 rupees. If you pay 1000 rupees each month it will take three years to pay off the loan. You will end up paying 35683 rupees approximately. That is more than 10000 rupees on interest and I have considered the interest rate to be 25% here. And if something comes up in between and something always does, you may not able to pay it off in three years, which means more time taken to repay and therefore more money paid on interest.
I have learnt my lesson the hard way. I have paid off all my credit cards and I do not own a credit card anymore. You don’t have to make the same mistakes I made and learn from me. If you don’t have a credit card, that is great. Don’t bother getting one. If you already have a credit card – try to pay it off as quickly as you can and get rid of it. You will feel liberated and it is a great feeling.
I just shared what I have learnt from my experiences with credit cards. What about you? Are you still using them? How do you feel about owning credit cards and about the repayments? Please share this post and feel free to comment on it.