From The Scars And Scares Of Discarding Credit Cards

 

20 July 2010

 

As a consequence of one’s employment status, credit card offers will also increase promising a wide array of luxury and conveniences. And with the lures of the things and amenities one can avail of with this rectangular phenomenon, swiping becomes as involuntary as one’s impulses. Depending on the frequency of payment or the complete lack of it, credit card companies will try to increase the credit limit whenever there is an apparent inability, on the part of the cardholder, to settle their dues only to make them dig a much deeper grave of financial indebtedness.

 

Credit cards work best for the banks. When they feel you are neglecting your financial obligations to them, they will start making endless calls to remind you, or harass you in disguise, until you are forced to settle your dues simply for reasons of avoiding litigation, legal suit or any further threats. Although it is not likely to make progress in court, cardholders are obliged to pay out of fear and to obviate further inconvenience from the collection agents.

 

In the first place, the concept of money is not very well deliberated in the classroom setting. It could be attributed to the prevalent notion that the love of money is the root of all evil when in fact it is the lack of money that actually is. One of the greatest human inventions is the idea of compounding interest that served as the bedrock of almost the entirety of lending institutions, government, private and individuals alike. The same scheme that increases your hefty bank accounts to positive infinity is used in credit cards but with the directly inverse effect. The balance and the interest charges are accumulated monthly and in perpetuity and charged accordingly with the default or pre-set interest rates.

 

If there is one thing that credit card companies capitalize on, it is the fact that there is a lack of financial education in the majority of hard-working employees. They have yet to define for themselves the significant difference/s between asset, necessity and liability. An asset is something that you purchase which still generates enough cashflow even after the transaction thus putting money back in your pocket. On the contrary, liabilities are those luxuries or the latest gadgetries you buy which will only further deplete whatever is in your pocket for reasons of maintenance or continuing electrical consumption in the case of devices. Then we also have necessities, both an asset and a liability, necessary to ensure one’s continuing existence, subsistence and survival.

However, we tend to treat everything as assets although it really is a liability. We always fall in the trap of treating ourselves because we think we deserve a new phone, maybe a borderless LCD TV, or the latest camera or any other gadget of greater features and storage capacity only to find out that in the ensuing days we will still have to work hard for the money and pay our acquisitions in a zero-interest rate or so it seems. This very cycle is regarded by some as the “rat race”. You wake up early, go to work, get your remuneration, pay the bills and tomorrow is another day for such and this goes on until eternity unless financial literacy meddles.

 

Cutting the same credit card, figuratively or literally, will never solve one’s lack of financial literacy altogether. As you start to pay in partial for those transactions under straight payment, it will only increase the likelihood of surcharges and such other finance charges both hidden and manifest. If we cannot do away with it then might as well maximize its full potentials and benefits after carefully managing the corresponding risks and obligations involved.

 

Contrariwise, credit cards can be a very useful mechanism once used wisely and judiciously. By increasing the amount of assets, and utilizing the card in the process, one can still be able to avail of the presumed liabilities in pursuit of human happiness. After all, our lives could be a bit easier with these pleasures within our reach.

 

The road from financial education leading to financial literacy and eventually financial freedom is a voyage that could take a lifetime and beyond. And if we are looking forward to a decent future for ourselves and our loved ones, we better brace ourselves for a quadrantal shift and leverage time and resources, including credit cards, and make it work to our advantage.

 

I suppose you have just received your credit card renewal. Give it a new lease at life. Care for a swipe?