Here's how you can plan better and pay smarter!
Whether one can afford something at the moment or not, one can definitely purchase it. Yes, plastic money has indeed made that possible by way of credit cards. However is fishing out a credit card at every purchase the solution? Probably not, and we shall see the reason.
With so many companies eager to distribute credit cards to clients, having one too many credit cards in the wallet has become a norm. This makes it all the more difficult to resist the temptation of swiping one when the cash is not enough. Paying with credit cards for reward points and immediately clearing the debt is not the case in point here.
The focus is on accessing the affordability of the purchase with respect to the income and the interest rates on credit money.
Here are five occasions when you must never pay for using a credit card.
1. The Big Fat Indian Wedding
This event is hyped more than a cricket match with our beloved neighbours! The list of must-haves for the big day is a public document. Everybody takes the liberty to add points on the list whereas all the purchases are to be made by the hosts. It is easy to give in, when there is so much pressure from people and a cocktail of emotions inside you.
However, never say we did not warn you.
Putting wedding expenses on the credit card is as smart an idea as going on a sugar diet before the wedding! The celebration is going to cost money which shall have zero financial returns.
Take a tab of the cash in your account and plan the wedding expenses accordingly.
2. Lend me a Vacation please!
A break from work or a dream to see the world, travelling features on the to-do list of a lot of people. The ideal way to plan a vacation is by looking at your bank statement.
The cash lying there must help decide on the destination and other details.
Travelling ambitiously by deciding to pay for the expenses on credit card can send your financal plans and goals on trip.
Earn for your vacations and take a vow to never pay interest for going on one. You definitely don't want to go broke while taking a break!
3. What's your currency?
Ask that question when you are abroad and pay in their currency! While fishing out the credit card may seem like the easy option, paying for clearing the debt later may not be so easy.
Many credit cards levy charges for swiping cards in foreign countries which may appear nominal at a glance. However, charges accumulated over all the small purchases are enough to put a hole in the pocket.
Definitely wise to pay in the local currency over credit card swiping.
4. Education on your cards
And by that we do not mean credit cards! Agreed that the fees for education are sky high and it is difficult to arrange for all that cash. But that hardly means swiping your credit card for paying the fees right away.
Since educational expenses are planned, money can be saved simultaneously.
Alternatively, one can apply for educational loans which arrange for immediate expenses and allow for some time later to find a job which facilitates installment payments.
These options work out better than credit card payments for educational expenses.
5. Miscellaneous credit purchases
These are those expenses which you may as well pay in cash. It's only a matter of convenience or habit that the credit card is picked over a walk to the nearest ATM.
Whether it is paying for a random clothing item picked at the mall, a pair of inexpensive shoes, a weekend dinner or movie tickets, make an effort to not put these bills on credit.
This will discipline your spending habit and keep you out of financial trouble. Resolve to spend only for the fun bit and not on the interest part.
While credit cards are here to make our lives easier, we must consciously strive to keep it that way. Let's make credit cards work for us rather than we working to repay all the piled up debts later. Plan better, pay smarter.
Photographs: Roadsidepictures/Creative Commons
The author is Co-founder and Director Credit Vidya.
