Getting a credit card? Pay your debt first

MANILA, Philippines – Are you planning to apply for a credit card to settle some overdue bills or personal loans? Or perhaps to even buy an expensive gadget you can pay on installment basis?

Lo and behold, hold your horses, and think about it and evaluate your situation.

First of all, having a credit card does not make you rich. Every time you swipe, the amount is technically considered as debt, or utang in Filipino. If you have outstanding payables, why would you add more burden on your back by getting an additional billing statement in your mailbox every month?

And unlike your regular utility bills, credit card billing entails fees, charges and penalties that add to your payables. Hence, credit card debt will just further drag down your financial goals.

If you’re still unconvinced, here are the consequences of an accumulating debt:

• It’s bad for your credit history. The longer your debt stays, the more you’re showing that you’re incapable of handling debt. And what does that mean? It means you don’t know how to handle money. What else does it mean? It means you’re not capable of paying future credit or loans. It’s bad for your record.
• It’s bad for your relationships. One way or another, irresponsible money management will force you to ask favors from your peers. Of course your family and friends would like to help you, but it’s not a good image to have multiple liabilities, especially if your debt is composed of impulsive purchases. If you think you even have to hide the fact you’ve got a credit card with all the other emotional baggage you’re carrying, you’re going to have all sorts of trouble.
• It’s a cycle. Credit cards can be helpful sure, but they haven’t been exactly serving their purpose in your case if you’re in debt! If you end up just paying for your monthly minimum every month, and you continue to make purchases with your credit card, expect to be buried in debt even more.
• It’s a changing system. If you have to know something about credit cards, it’s that they change rates. If the 0% rate is consistent, why do you think so many people are trapped? They’re led into thinking they’re paying off their debts when they’re merely paying off the interests!

How can you avoid being trapped further in this cycle? Below are a few steps you have to take—and take seriously:

• Resist the urge to shop. Scold yourself for your past impulsive purchases and start anew. Change your priorities. Plan your trips to the store. Every cent counts now. Spend below your means! You’re not rich if you’re in debt. Wake up!
• Pay above the minimum. Get rid of your debt. It’s a parasite that’s only there to suck your blood. Debt is never a good thing. You wouldn’t be able to sleep well if it becomes too big. It will affect your well-being sooner than later.
• Leave the card at home. Don’t trust yourself. You’re not strong enough to resist temptation. You can bring it along only if you use it for big purchases that are actually a necessity. Never use it for easy purchases like food or clothes.
• Try a debt consolidation plan. If you have multiple card debts, stop the cycle and apply for a personal loan. If you get your loan money, pay off all your debts and don’t open new accounts. Leave all the credit cards at home (the ones with debt), and focus only on paying off your personal loan.
• Resist. This is like an addiction you have to be free of. Always check yourself if you’re tempted to spend. Practice the utmost self-control all the time. Resist, resist, resist!

If you see your debt actually start getting smaller, then you can start building on your financial goals altogether. Credit card debt isn’t something you can simply brush off. It’s a serious problem that’ll eventually drain your resources if you don’t nip it in the bud while you still can. So unless you’re very sure you have a steady growing income, postpone that card application and focus instead on maximizing your current resources.

Getting a credit is actually easier than maintaining one. – Rappler.com

MoneyMax.ph is an online platform for comparing financial and telecom products and services. It aims to give the power of smart purchase decisions back to Filipino consumers by providing everything they need to become financially savvy.