If I were to ask you if you used credit cards on a regular basis, the majority of you would say, “Yes.” Most Americans carry one or more credit cards. Some carry ten or more. In fact, several people with multiple credit cards are in credit card debt. This does not mean that those who only have one or two cards are not in debt. They are. Do people set out to get in debt? Of course not, they get their first credit card in college or when they get their first job.
Unfortunately, because most American children and young adults are not taught how to handle money and credit, when they get their first card they don’t stop charging on it until they reach their limit. When they receive the bill, they will only pay the minimum required amount. Thus, leaving a balance that will continue to grow and accrue interest. Not only that, but any new charges on the card will also accrue interest. This is great for credit card issuers, but it is a disaster for the cardholder.
Some of you might be saying, “I only use my credit card(s) for emergencies.” Really? Let’s look at what is an emeregency. You might be saying the following are emergencies:
- The car broke down.
- My car needs new tires or brakes.
- The appliances broke down or need to be replaced.
- My children need new school clothes.
- The doctor or dentist bill needs to be paid.
- The house needs a new roof or it needs to be repaired.
- The air conditioning on the house needs repair or replacement.
- An on and on…
Do these sound like emergencies? Most of you would reply, “Yes.” Well, I am going to tell you that these are not emergencies. These are expenses that you know will occur at some point in time. Nothing lasts forever and we all get sick and need dental care. What makes them an emergency is you not being prepared for them. These expenses should not catch you by surprise and you should not need to put them on a credit card.
Now you’re thinking, “Oh, really? Then, how will I pay these expenses when they raise their ugly heads?” The answer is very simple. Since we know that they will occur, we need to account for them in our budgets and start saving a little each month for them. Then, when the expense rolls around, you won’t reach for your credit card. You will simply take the money out of the account where you have been saving for it. Then, once it’s paid, you can continue saving for them. Planning is what is key here. Plan for those expenses and save for them. Then, they won’t be a surprise when they come about.