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Sound financial management is a prerequisite to optimum personal growth. There are lots of individuals and families out there tangling with money issues, subsequently expanding the negative influences to their careers and relationships. They end up quarreling with family members each and every day and working under pressure just to ensure they are able to fork out money to settle the stacking bills and credit card statements. Over here, I am not going to flood you with numbers but to share with you my personal experience concerning credit cards.

Let’s be Clear with the Initial Purpose of Credit Card’s Creation

The creation of credit card is for the shoppers’ convenience to buy goods or services without having to hold cash in hand. I have to emphasize, in this situation, you need to have sufficient cash in bank, and ensure your card balance is paid off every month, thus no interest is charged on purchases made.

Are You Ready for Getting a Credit Card?

My ultimate intention for this question is not asking you whether your income can qualify you to own a credit card. Nowadays, if you throw a stone to a street, your stone can easily hit anyone who is qualified to own a credit card based on their income.

When you start considering to use credit card, first and foremost, you may have to ask yourself, ‘Do I have self-discipline?’, ‘Will I overspend?’ Credit card can effortlessly lure you to overspending as the credit limit provided for you is always higher than what you can earn monthly. If you have the tendency of possessing whatever owned by others, then you better avoid credit card. Let me provide you an example of my friend, Lynn. When she goes shopping with her friend, if her friend wants to buy a pair of shoes, most likely she will follow and buy a pair for herself too even though she never plans to do so before shopping. Shortly speaking, she can hardly overcome temptation.

For those people who can easily be seduced by the shopping goods, they will not face any financial problem if they are backed with ample fund in their banks. On the contrary, if they do not have sufficient money in their banks, credit card usage will subsequently turn into their ‘personal loan’ to advance ‘future money’. A lot of people treat it like personal loan as the balance can be paid off by instalment. If you really have such thought, undeniably you are trapping yourselves into a deep debt and approaching a ‘fiend’ of your life. We call this way as misuse of credit card. If you are one of them bearing a credit card debt, here is a link you can calculate how much time you need to repay the balance.

Credit Card – My Once Fiend

Credit card was my fiend formerly. I am not shy to tell you I have ever fallen into the credit card debt. I am here to seriously warn you don’t ever misuse credit card.

When I was at the age of 24, I had ever stacked my credit card debt to as high as RM12k (around 3,800USD). I didn’t spend for expensive clothes, shoes or other fashionable stuffs.  I was tied with this debt because of running a direct-selling business. At that time, I treated credit card as my business capital, which was my biggest mistake. I fell into such situation whereby I had to worry about my sales because it directly affected my repayment to the bank. As I used credit card to buy my stocks, the situation became worse when some customers postponed their payment after getting the products. The worst case happened when some customers even owed me money without paying me back. I ended up owing up to 7 banks. I only managed to pay the minimum; sometimes higher than the minimum amount when I got more sales for that particular month. Instead of managing how much I ‘owned’, I got to manage how much I ‘owed’ by taking note of the payment due date of every credit card statement.

I had even thought of obtaining a personal loan to refinance my debt, in order to avoid myself from managing so many statements. In fact this idea doesn’t worth considering if you calculate properly the interest rate incurred for long-term basis. I am not going to show you any figure because I do not recommend this solution. If you are free, you may have a look at this article – Personal Loan versus Credit Card Debt by the Star newspaper.

I went for AKPK consultation. AKPK (Credit Counseling and Debt Management Agency) is an agency set up by Bank Negara Malaysia to provide counseling and advice on financial management, debt management program and financial education. Although AKPK was not my final solution but I did attend their seminar to understand the services provided and realize that many credit card debtors have benefited from this program. I do agree that this will be an ideal solution if you really can’t find any other better solution. For those staying outside Malaysia, I am sure there are debt management organizations that can help you to get out of credit card debt. But please be sure that the debt management organizations you go for are legal and it will be wonderful if those organizations are backed by the government. Do feel free to visit AKPK’s official website for further details.

Finally, I had recourse to my father for settling my credit card debt. I did not wish to let my parents know at first but I considered this was my best choice, seconded by AKPK’s solution. I managed to pay back all my credit card debts to the bank, after having to borrow money from my father. I pay him back monthly without fail.

For those who want to get out of credit card debt, the very first step you have to do is to get a stable job and stop escalating your credit card debts by investing in high-risk investment tools. You are not advisable to invest before paying off your debts as most of the time your snowballing credit card interest is higher than your investment return. If the family is unable to help you, the best solution will be debt-management agency like AKPK, as far as I know. Don’t ever think of unlicensed financial institutions, you will be immobilizing yourself into another bigger pitfall.

So, Is Credit Card Our Friend or Fiend?

My conclusion on this question after having such a miserable experience – never overspend using your credit card if you don’t have such amount in your bank. Spend it only if you have the ability to pay back when you receive the statement at the end of the month in FULL, not partial. Don’t ever think of paying the minimum amount only, you may never get out of credit card debt.

If you know you are lacking of self-control and you want to enjoy the benefit of cash-free shopping experience at the same time, you may consider applying for a debit card. Debit card is like your portable ATM card that allows you to pay to the merchants just like the credit card during shopping. The only difference is you can only spend whatever you have in your bank. So you will never overspend using your debit card.

I am still using credit card even after a bad experience, but I am sure I know how to use it wisely now. I don’t hope you will only learn how to use credit card correctly after going through a distressed period like me. Now credit card has turned into my friend. I am only using 1 credit card right now (no credit card debt) and have already said ‘goodbye’ to the other 6 credit cards that I previously used.

I am serious enough to disseminate this message to you. Hope you also take it seriously.  Learn to embrace the right concept about money, read Money Is Innocent.