So before I start, apologies for how long it took to post. Life has been busy and my wife and I had an amazing (free!!) trip as well-but more on that later. :) Also, I’m told that the “pros” have lots of pictures to keep people interested and I don’t in this post. So don’t fall asleep–it’s important stuff!
I’ve worked in credit card processing for most of my life so perhaps I have a slightly different slant on the use of credit cards. I like to use them for the rewards I get but all too often it seems that we allow the banks to use us rather than the other way around.
I want to talk about many things related to credit cards and how I use them but thought I should start with a general overview. As most of us know, credit allows us to use a line of credit (loan) that a bank has established for us. All too often, people look at this as “free” money or “I think I’ll go to the mall” ie “SHOPPING SPREE!” Stop right there! If this is how you look at credit cards, then feel free to not use them. Believe me, this is for your own good! :) Instead, wait for that eventual spouse to come along that will hopefully balance you in the area of finances if you are single or consider handing that portion of finances over to your spouse if they can handle it better than you.
The other side of this discussion is what I have to say I hear the most in our very far corner of California. And I quote, “I’m NEVER getting a credit card because they ALWAYS lead to debt!!! And believe me, the tone definitely indicates multiple exclamation points! ;) The truth is, credit can be a tool if you are responsible with it.
My response to the (usually young) individual is this: “Oh, really? Do you ever plan on owning a house? If so, are you planning on buying it for cash?” Now, if you can save enough money to buy a house in cash, congratulations! Do it! However, most people that I know simply can’t afford to buy a house straight up like that.
Enter the mortgage! That’s right-30 years of debt slavery to a bank. That’s a long commitment of 360 payments to one financial institution. Probably one of the biggest financial commitments that you will ever make. Which is why the bank is going to thoroughly investigate your financial prowess. And how will they do that you may ask? I can tell you from personal experience: reams of paperwork: tax returns, pay stubs, etc. That paperwork will show what you can afford. You have amazing financials? Congratulations! You can afford a mortgage payment! Oh? You have no credit history? Mortgage denied!
Why would they deny your obvious potential? Because without credit they have no way of knowing that you WILL stick with them to the bitter end. Your credit history shows something very important to the bank. RESPONSIBILITY. That’s right. I did say the “R” word. The bank wants to know that you will keep a commitment (like a 30 year!! loan). No credit shows no financial responsibility.
So what do you do if you have no credit history? Get a credit card! :) Does this mean that you go on a shopping spree simply because you have a credit card? No! So how do you use credit wisely. Why, by buying only what you would already buy! Do you still need groceries? Gas? Do you ever go out to eat? Buy what you would already normally buy. And then, and this is VERY IMPORTANT, pay the balance in full!! By doing this, you will build a credit history that will really help towards that eventual home purchase. And if you get rewarded for your purchases using your credit card, well do you have a problem with that? I sure don’t! More on that to come!
Are you a credit card user? Do you use it wisely? Have you considered the impact your credit has on purchasing a home?
adventuresinlivingandsaving 