Some people learn the hard way to NEVER abuse the privileges of having a credit card. Do it once, and you’ll do it again and again.
The high interest rate charged by credit card companies will break you. To make matters worse, the IRS doesn’t allow you to deduct personal credit card interest. You’re paying interest with after tax dollars. With an interest rate of 18 percent interest, you can easily pay as high as 36 percent.
This doesn’t mean you should never have a credit card. Credit can be your best friend,, or, your worst enemy. Credit can make you a lot of money, or it can break you, depending on how you use it.
A Credit card can work for you, or against you
Not using credit cards, permanently, is a bad business decision. Credit can be a very forceful tool for your business when used correctly. You have to know what’s good, and what’s bad. Having the wrong credit card can hurt you, and sometimes, devastate you.
When you decide to get a credit card, make sure it’s a reputable card, such as VISA. Always do business with a bank you know and trust. YOU take the initiative and contact the credit institution of your choice. NEVER fall victim to credit card companies that send you junk mail. When you receive a piece of mail saying that you’ve been pre-approved by a company you’ve never heard of, ignore it. There’s a 90 percent chance it’s a scam.
How a credit card can work in your favor
Assume you need to invest in something that you feel is going to make you a profitable return in a very short time. Let’s use $100 for simplicity. This is a great opportunity to take advantage of leverage.
To keep from using your own money, use your credit card to get an advance for $100, and invest in this project. Then, you double or triple your money in a month. Finally, when the bill comes from the credit card company, you pay only $100 with someone else’s money, and come out $100 or $200 to the good. After you pay the balance, the results are, balance paid in full, and no interest.
Another way credit can work in your favor is the thought that you actually have it, in case you need it. That time will eventually come, but you never know when. As a business person, you need credit. Could Bill Gates borrow $1 million from a bank with only his signature, with no questions asked? Probably so.
Don’t fall into the credit card trap
Most of the people who file bankruptcy had to because of credit card debt. It’s so easy to do. You get a credit card, buy the things you need, and think, “No problem. I’ll pay the bill when it comes due.”
The charges add up very quickly. Suddenly, you find yourself in a position where you’re not able to pay the entire balance. So, you pay the minimum balance, thinking you’ll pay it off next month. This very seldom happens. In the meantime, you’re charging other purchasing because it’s so easy.
That’s when they stick it to you, this month and from now on. Don’t fall into the credit card trap because it will take you years to get out of it, provided you can get out of it at all. You could find yourself paying over $100 for a $5 lunch you ate 1 years ago. Don’t let it happen to you.