I don’t care how many times I have heard it said I will NEVER believe that money is the root of all evil. Sure it makes people do evil things sometimes and the lack of money brings more chaos, but it is not the root of all evil. In fact, money can buy 99% of all the things you need to be happy. At this particular time in our life it seems that credit cards have become the new root to all evil.
I don’t care what equation, algorithm or method of computing you use your credit card limits do not equate to money. It is not a bank account. If you do not have savings and other assets the minute you start charging you are in the red.
Credit cards themselves are not bad, nor is having credit cards. Using credit cards is not that bad either. It’s the credit card abuse that makes life hard. How you use your credit is what makes the biggest difference between a stressful financial situation and a peaceful one. Believe it or not credit cards are the fastest way to build up your credit. Whether you use them or not they report every month. If you have a credit card with a $10,000 limit and you do not use it, it will still report paid never late which helps your credit score. It also puts a bigger gap between your credit utilization ratio. That is, the amount of debt available to you verses the amount you are utilizing. The minute you start using it you risk your score going down. When the balance is at 50% it is considered maxed out.
Wealthy people do not max their credit cards out because they realize they will end up paying more in interest unless the interest is at 0%. Credit cards are loans. Loans are liabilities. I am not saying this to be insulting. I am simply reminding you because it seems that the citizens of the United States have become so dependent on survival by credit.
I know credit is needed that’s why I preach for everyone to take care of their credit score. And I also know that in case of emergencies and especially in business it is wise to use other people’s money to get ahead. Just be smart about it. Don’t get in the bad habit of using credit because you want to do something you cannot afford to pay cash for. When you charge dinners, travel, shopping and frivolous items on your credit card, unless you can pay them off ASAP, you are wasting money. If you do that, make sure you add in the interest you are going to pay when you are calculating the cost.
Most wealthy people use credit cards to build up points so that they can use the rewards later. Remember I said credit cards are not bad. They do have some benefits. Use them properly and they can come in handy. They serve a purpose. Follow the rules of credit and it will all work out.
“Using other people’s money (at the right time)….Now that’s Presidential.”