How to Use Credit Cards PROPERLY
Updated: Jun 26
Don't! For the love of sweet baby black Jesus, don't.
Ok, we'll see you next time on... THE IKECHI SHOOOOOOOW! [bows and exits stage right]
Ok, really, this is a very important subject. So I SHALL be serious 😑😑😑 According to USA Today, the average American carries a credit card balance of over $6,200 (https://www.usatoday.com/story/money/2020/02/12/credit-card-debt-average-balance-hits-6-200-and-limit-31-000/4722897002/) That's huge. With the average APR of 18%, those balances are sure to skyrocket at alarming rates due to interest. We've got to do something about this. I want to focus on two points to help us tackle this: 1. How to stop using revolving credit card 2. How to pay off your credit card debt The first point will be rather simple. Maintaining a balance on a credit card should be avoided at all costs. With the sky-high interest rates, any balance carried over from month to month is increased with the amount of interest attached to it. If left unattended to merely paying off minimum balances, the consequences can quickly spiral out of control. The solution is simple. Pay off whatever you use by the end of each billing cycle. That means to make sure you have the balances to whatever you plan to use on your credit card. The hardest thing about productively using a credit card is the mindset. If you think about it, it really comes down to discipline. The reason this is so important to me is that I grew up not having this knowledge are the mindset for how to approach lending responsibly. As a first-generation Nigerian American, my parents didn't have classes in financial planning. We were taught financially inaccurate principles that included using credit cards for emergencies. Yes, like in lieu of an actual emergency fund. With belief systems like that, you can definitely see how things can become sticky very quickly. This isn't a shot at anyone who is currently in that situation. It's not a shot at our parents either! My goal is to make sure I can give as much simple financial information and wisdom to help people change their lives. This is an area that a lot of people struggle with due to a lack of knowledge. The second part of this article that I focus on is how to pay off credit card debt if you're in it. This part is actually pretty simple. Make sure you have at least $500 in savings if not $1,000 in savings. Then, pay off the highest interest credit card first as quickly as possible. When I say as quickly as possible, I mean spend as much as you can paying it off. This is where the discipline comes in. Obviously, credit card debts sneak up on us because we're buying more than what we have to spend. This means that you have to cut off or limit your spending in order to get rid of the high-interest rate on the credit card. But let's say you would choose just to pay minimum payments and carry a balance month to month. What would be the alternative?
THROWING away money! I used to tell my clients this: What if I were to tell you I had an investment that has guaranteed earnings of 15% up to 25%? GUARANTEED! This investment was so easy to get into. All you would have to do is put your money into it. Then, you'd immediately start getting payments back. What if I were to tell you that credit card companies and lending services see YOU that way?
Yes, you, Bryan Cranston. Especially you.
They basically get rich off of you maintaining balances and paying minimum payments. Ok, you in a general sense and not just Bryan Cranston from Breaking Bad and Malcolm in the Middle. What an actor though, am I right? They don't care about your accolades, sir. Instead of letting them get rich off of you, wouldn't you want to get rich off of other companies like them through investing? Of course, you would!
Bryan Cranston, I think you're getting it!
The moral of the story is keeping balances on credit cards or any sort of lending product will cost you so much in the long run. If you're going to use a credit card, use it responsibly. Try to avoid carrying debts and instead use your money to invest so it works for you. For any investing tips, simply refer to one of my investing articles for educational tips, I love talking about this stuff so please let me know if this has any value to you. Ok, for real now... We'll see you next time on... THE IKECHI SHOOOOOOOW! [bows and exits stage right]
(Thank you Cartman for actually pointing stage right👍🏿)
DISCLAIMER - NOT FINANCIAL ADVICE The information is not intended as, and shall not be construed or understood, as financial advice or a recommendation but rather as financial education. I'm not a financial advisor, nor do I portray myself to be. I have done my best to ensure any information provided is accurate and provides valuable educational information. The information I provide is not a substitute for financial advice from a professional who is aware of the facts and circumstances of your particular situation. Please continue to do your own research and make the best decisions for your situation.