As a consumer debt expert that helps people find their way out of debt I think over the years I’ve seen tens of thousands of unique ways to wind up in trouble with credit cards. And as a confession I have to tell you that the reason I became so interested in helping people with debt is because I found myself at the bottom of a deep and dark debt hole and learned many painful lessons on my way out. Some of these lessons are best learned from the school of hard knocks. Now that I’ve learned them, you don’t need to discover them for yourself.
Lesson 1 – Just Because You Get a Credit Card it Does Not Mean You Can Afford It
When a bank approves you for a loan or a credit card it does not mean you can afford it. It only means the bank or lender was willing to take a risk with you. In a desire to extend more and more credit to make more and more money, some very smart banks can make some really dumb decisions that leaves people indebted way over their head if they are not careful. You have to be the ultimate judge of the affordability of credit you take out. I’ve seen many people that burst with pride because they’ve been approved for this or that but the bank isn’t thinking pride, they are thinking profit maker.
Lesson 2 – The Banks Purpose For Giving You a Credit Card is to Make a Profit
A credit card is a privilege, not a right. It is an extension of credit by the bank which the bank allows you to have access to at their terms. The goal of the credit card bank is not to allow you to have a priceless life, it’s to make a profit off your use of their product, the card. This leads to a lot of changes along the way and none of them are for your benefit. When you have a credit card you will notice that interest rates may change, minimum payments may rise and fees only get bigger and bigger. And and watch for the shifting due date to trip you up and miss a payment date.
Lesson 3 – Using Credit Cards to Make Ends Meet in An Emergency is Not a Good Thing
People that use credit cards to make ends meet when they otherwise can’t afford life wind up in terrible trouble. While a credit card is a good tool to use to make a financial transaction that gives you a lot of consumer protection, it is a bad instrument to use to finance a life you can’t afford. Using a credit card to pay other credit cards is never a good idea. And just because you have a credit card to use does not mean you should use it.
Lesson 4 – Credit Card Rewards Points Are Not Worth Spending For
The reward programs offered by credit card companies are there as an inducement for you to want to use the card. They are designed to grease the skids for that card to come out of your pocket as the preferred card to use. At the end of the day most of those reward points are never used and those that are redeemed, for example for air miles, are worth less than the discounts that could be obtained by shopping for discount airfares to begin with. Reward points typically come with significant restrictions or are limited in what they may be used for.
Lesson 5 – The Fine Print Really Matters
When you apply for a credit card online or through the mail you really should take the time to read all the fine print that comes with the card. That fine print is very important since it is the agreement you are entering in to with the bank to use the card. Don’t be surprised by hidden rules or fees, get to know the real terms of the deal and not just what the marketing offer says in big print.