Practical Finance: Don’t fall for credit card tricks
I don’t know about allyuh but I hate to spend money. I get instant buyer’s remorse, no matter what it is. I remember while recovering from shoulder surgery in 2020 I was asking myself if I really couldn’t live with the pain. I mean sleeping is overrated anyway right? However, what I hate more than spending money is owing money, especially credit card debt. Every time I swipe my card I feel as if the bank is laughing at me, like the blue bank is calling the green bank and saying “you ain’t see what this ‘yiyon’ now spend money on?? lololol”
So when I opened my online account recently and saw the bank raised my credit card limit by 16.5% I was like, who asked allyuh to do that padna? Yuh see, that is one of their tricks right. They tell themselves, hey this bloke is managing his credit decent enough, never pays late, always pays more than the minimum, lets reward him by giving him the ability to buy bodi for his entire neighborhood. Then these same banks turn around and use your entire credit card limit when they calculate how much you can afford to borrow.
The other trick they have is offering you rewards for every dollar you spend. Yes, getting miles or points for money you would have spent anyway is a good thing, but spending money on a card just to get rewards is full of peril. Again, the bank isn’t this benevolent entity that asks itself how can they make their customers lives better, nope, they’re always strategizing how to make ALL the money, as any good business should. The rewards trap is a gamble on their part that we wouldn’t pay off our full balance by the end of the cycle and end up carrying a balance for which they will bend us over and apply stiff interest, sans K-Y. If you’re spending to get rewards then make sure you put the cash on the card asap. Remember the golden rule, ‘after freeness is “eenis”’
Then there are the tricks that we play on ourselves like the “retail therapy” trick. We’ve all done it, we out minding our own business, seen something we want, know we didn’t budget for it but we tell ourselves “yuh know what, eff it…I does work hard…I almost burn the office to the ground this week…I have one life to live” and we close our eyes and swipe that card. Next thing we know that limited edition bottle of gin is costing us hundreds of dollars in interest. Don’t let impulse buying land you in problems and derail your goals. That dream vacation to Fyzabad not going to pay for itself.
The next trick we play on ourselves is thinking our credit card is our emergency fund. Yes, it can come in handy in a pinch, like if you’re on a work trip, they didn’t book your room in advance (again) and you’re not feeling to sleep on the ground in Times Square. However, you need to have a proper emergency fund that does not leave you in a mountain of self sustaining debt that harder to get rid off than the image of J-Angel in a ‘cyatsuit’.
Personally, I have one simple rule when it comes to credit card debt and that is to try to never carry a balance more than I can pay off within 6 months. Let’s be real, not all of us can afford to pay off our card in full every month but having a maximum limit of what you can comfortably owe is a good place to be, at least for me. At almost 25%, the only thing worse than credit card debt is Island Finance debt. If yuh didn’t know, Island Finance website says “Our minimum period of repayment is 12 months and the maximum is 66 months. Our Minimum Rate is 14.99% and the Maximum Rate is 49.00%.”……49% inno garcon!! Not me nah papa!
TANA