Video 5: Credit
Written by Aija Zablovska Thursday, 21 July 2011 17:05
Like any man who's man enough to be honest about these things, I've got some fears, from sharks to five cent coins. Hopefully, I'll never have to confront most of them, but recently I was able to overcome one of my greatest fears - my fear of credit cards. Observe:
I thought my credit aversion was unique, but it really isn't – following the GFC, Australians have become cautious with credit and even staying in at night to save more. So the good news is, if you're a frightened hermit you're not on your own (well, technically you are, but so are the rest of us). The bad news is reserved for retailers (which sucks if you work in the industry I'm sure) and credit providers.
Personally, I've always been afraid of credit cards because it seems to me that credit is a zero-sum game, where creditors can only make profit, and therefore can only survive, by charging interest – i.e. by making you pay more for stuff than it's worth.
But leaving that aside, I still want a credit card, and apart from the personal motivation - that of feeling like a big man, I can see the following benefits of having a credit card:
- It helps you to establish a credit history.
- It offers convenience in managing the peaks and troughs of your pay cycle.
- Travel is a whole lot easier with a credit card, especially one that caters to travellers.
- Rewards programs tend to offer some pretty sweet incentives – frequent flyer points are particularly attractive to me.
But bearing these perks in mind, I've resolved to be an absolute miser when it comes to using my card, and here's how I'm going to do it:
- Pay off my balance in full before the end of my billing cycle to keep my credit card working for me.
- Choose the right card. I've done some serious research (starting here) and decided I'm going to go with something that has a low fee, and a low interest rate just in case I do get into trouble. And to be super Spartan about the whole thing, I'm getting a card without a rewards program, just so I'm not tempted.
- I'll make sure that any expenditure falls under my budget.
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