Friday, 16 May 2014

How to use a credit card.

A drug pusher may give you the first hit free of charge. There is a good reason for this.

How may be access the benefits of credit cards without losing control?

The use of credit cards comes down to a battle of wills between yourself and the provider. We want convenience and loyalty points. The provider wants a debt serf. Only one can win this battle.

The best way to use a credit card is not for the credit at all. Use the card as a budgeting tool and pay the balance in full each month. This means no interest will ever be paid and you will usually be covered by some form of purchase protection.

The provider realizes your plan and tries to install bad habits before you become used to using the card properly.

The provider will generally offer credit limit of several months wages. This almost ensures you will roll the debt forward from one month to the next.

They will also often offer an extended interest free period. This creates the habit of rolling debt forward from one month to the next. In fact this is quite logical to do this in the initial interest holiday but it is a difficult habit to end when the holiday ends.

There is nothing like a bit of time travel to cure money worries. Oxford transports us to another age and while we are there we will feel ourselves a character in Brideshead Revisited. Unfortunately the effect is not permanent.

Finally the bank may offer some form of incentive to encourage spending in the first three months. They do this because they know that the habit of placing everything on the credit card is as difficult to break as smoking. A person with a large credit card balance may be forced to divert all of his or her cash into repayments. This feels good at the time but the credit card debt will reappear very quickly if the owner is living without cash.

It is only possible to profit form credit when we do not need it.

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