Friday, January 25, 2013

Are Credit Cards For Necessity or Luxury?

There may have been so much advances today in the world of banking and finance, but one thing remains intact: the use of credit cards.

Credit card is one of the most famous gate passes to a cashless society. However, this does not mean that you will NOT have to pay cash. The use of this small plastic card only entails that you will borrow cash first from the bank or credit card company, and these entities will pay your bill to the seller or selling institution. With just a swipe of the credit card, they are to settle your dues immediately and you will pay the due amount following an arrangement later.

Having a credit card means that the credit card agency entrusts you to get a loan for your expenses. The higher the credit card classification such as gold and platinum, the more sophisticated and classy your standing is.

Thus credit cards can sometimes be viewed as a status symbol. As you splurge in shopping using your credit card, and you can maintain a good credit score and credit standing, credit card companies tend to be in your favor. They feel honored having you as their first-rate client.

Spending more or spending less is not the yardstick of measuring whether you are already regarding your credit card as a luxury or just as a necessity.

Answer the following questions to know your standing:

1. Do you buy things you don't really need but buy it anyway because there's a credit card that gives you the power to do so?

2. Can you pay all of your credit card debts?

3. Have you reached the maximum limit of your credit card and have problems paying for it?

4. Do you purchase a lot of things that you can't pay for?

5. Are you late in submitting payments for your credit card bill?

6. Are you subjected to pay interest rates because you have not paid your credit card monthly dues for months?

7. Can't you recover from your credit card debt?

8. Do you request for cash advances using your credit card when you don't need them for emergency purposes?

Now is the time to count your yeses. If you answered more than four yeses, you know you are treating your credit card as a luxury. And you're not in good shape!

End Notes

Keep in mind that credit cards are built mainly as a necessity and not as a tool adding up to your financial worries. Credit cards are used when you don't want carrying loads of cash in your wallet, when you can't pay for this month but can pay for the amount in installments, and when you can still manage your finances well. Don't allow the credit card to control your expenditures.

To preserve your credit worthiness, think before buying anything. Ask yourself if you can afford it and if you really need it. Credit cards should give you positive convenience and not the other way around.