So you’ve just received your first ever credit card! You may have applied for it on your own or your parents may have provided you with a credit card extension. Either way, having a credit card opens up a lot of benefits for you to enjoy. But beware! Having that piece of plastic in your hand can be dangerous too, especially if you do not know how to use your card smartly.
Using a credit card can be so tempting and can lead you to debt. According to the Bangko Sentral ng Pilipinas, the total credit card debt in the Philippines has amounted to Php 157.394 billion in 2014. That’s a lot of debt!
So what can a student like you do to avoid incurring credit card debt?
Keep a budget
This is one of the basic tenets of financial literacy. Whether you have a credit card or not, you should learn how to budget your money. Take note of all your expenses so you can see how much you’re spending on what. This might seem tiresome, but it is important! There are apps that will help you monitor your spending habits. The rule of thumb is to stick within your budget. Live within your means!
Treat your card like cash
It can be tempting to make a lot of purchases when you’re not paying in cash. After all, it’s hard to keep track of how much you’re actually spending when you’re happily swiping your card. So imagine the shock when you finally receive your billing statement and you find an obscenely high balance. Who would have thought that your weekly dinners and all those fancy lattes you chugged while studying will amount to thousands of pesos?!
Refrain from spending more than you can afford by treating your card like cash. This means that you shouldn’t spend more money than what you have in your bank account. If you do not have the money to pay in cash in the first place, then you have no business swiping that card.
Pay your bill in full and on time
Always pay the full balance on or before your due date. Credit card bills can be misleading because of the indicated “minimum amount due” or “minimum payment”. Do not make the mistake of thinking that this is the only amount you need to pay. If you only pay the minimum, the rest of your balance will be charged with interest! And if you pay late, you will also have to deal with finance charges or late charges.
A credit card is a tool that you can use to your advantage. It’s convenient when you do not have cash on you, when you make online purchases, or when you have an emergency. The key is to use your credit card smartly. Remember, the last thing a college student like you wants to deal with is credit card debt. You don’t want to struggle paying your debt especially when it increases every month because of interest!