When I was a little girl, I loved to watch horrors, sci-fi, anything with adventure and that rollercoaster-type thrill, not to mention listening to all the Caribbean folklore like La Jablesse and Steel Donkey. This was all great fun during the day, but you see, when night came, and the place got dark…your girl was a total mess. Watch me racing through the dark spots of the house to get to the well-lit parts, and when mummy turned off the light in my room, I would be under the covers and my eyes shut tight. 

That my friends, was my safety net – if I don’t look out, then nothing can hurt me. It made sense to my child’s mind, and you may laugh at my logic (or lack thereof), but how many of us delay looking at bills and credit card statements, afraid of what it would show?  As if not looking would make it all go away…my child logic doesn’t seem so far off now does it! 😊  Unless of course, you readers are already mature with managing your credit cards, if so, humour me as I share my story about my credit card dramas.

 

Don’t Feed The Card

Credit cards are such a convenience to our lifestyles – online purchases, not having to carry around too much cash – and depending on your preference, travel points.  These were some of the reasons why I decided to get a credit card. Personally I love the travel perks.  However, the other side they don’t always tell you is the astronomically high interest rate on these cards, and even if you are made aware, sometimes you don’t really realise what those rates translate to. 

So, there I was with my new credit card, and I had a plan. My credit card was to be cleared off every payment date to avoid the interest charges.  That worked well for a few months – then I travelled, and we all know what happens when we travel.  Let’s just say that my salary was not enough to cover my expenses, and I didn’t do much saving before, because well, I had a credit card (remember back in the day you had to save up to buy US Dollars so you could travel).

Remember the movie Gremlins where the owner had strict instructions to not wet the gremlins or to not give them food after midnight, and they broke the rules? Well my nice cute credit card balance became like a gremlin – a raging monster that just kept growing because I kept spending (legitimate monthly expenses), and was not paying off that debt fast enough, so the interest kept compounding.

Financial definition: For the non-financial readers, if you have debt that is compounding interest, it means that every month, interest is calculated not only on the principal (the original debt), but also on the interest from the past month. Please, avoid these kinds of debt as much as possible.

 

Emotional Crisis

I don’t like being in debt, and not having enough money to go to my savings really had me in a slump.  I would delay looking at my balance until the last minute: to live in denial at least one more day, have money in my account for at least one more day.  But, being an adult means that there comes a time when you must face your fears.  It really got to me at times, the feeling of working and not having anything to show for it.  So, I had to come up with a plan.

 

Gaining Control

The first step was acceptance – realizing that I needed help with this debt. So, I looked for the cheapest form of debt I could afford to help me settle the credit card bill. This might sound funny – but all debt is not the same, some debt is cheaper (lower interest rates), or may have more lenient payback terms, and different interest calculation (simple versus compound).

Of course, now although I settled my credit card bill, I still had another loan to repay. This required sacrifice, but at least I wasn’t as pressured as with the credit card fees.  Eventually, I was able to pay off my loan and instead of leaving that money to my disposable income, I redirected it to a savings instrument that had penalties if I touched it.  In this way, I ‘pay myself first’, before I spend money on other things.

 

Final Words

My advice to anyone – credit cards are great. I still have one, but if you are not disciplined or in a position to ensure that you manage your spending, you have three options:

1. Choose a visa debit card instead, since this gives you the benefit of cashless and online shopping, but you are restricted to actual cash you have loaded on the card.
2. Implement other controls to prevent you from using your card (for example, don’t walk with it on your daily outings, or give it to a trusted friend or relative).
3. Don’t get a card.

Do you have any other tips for managing credit cards? I would love to hear them. Let’s share!

 

 

Image: freepik