by the Money-Minded Millennial

Is there anything more exciting than getting your first credit card? That amazing little piece of plastic which you can magically wave or swipe at the check-out when you see those pair of shoes you just have to buy, or that new game you need to download so you can play with your friends online. It feels like having free money, doesn’t it?

Well, I’m here to tell you – it isn’t! In fact, once you factor in interest rates and late payment fees, spending irresponsibly with your credit card can land you in some pretty scary debt.

Don’t get me wrong; credit cards can be a great way to boost your credit score, manage your spending, and reap exciting rewards – from cashback to amazing discounts on select products. However, credit cards can be dangerous if you are prone to impulse shopping or don’t have good control on your spending.

Credit cards allowed me to get things that I couldn’t afford and charge it to my future self. I bought things that I didn’t need. I was purchasing to satisfy my wants. Zara’s on sale you say? What are we waiting for? Lunch, dinner, holidays — all got paid for using this amazing piece of plastic.

At the end of each month when my credit card statement came in, I would just pay the minimum amount required. It didn’t seem like a lot of money.

However, reality hit when I saw that I had racked up a huge credit card bill. That’s when I had to stop and take a long hard look at my spending and figure out how to get myself out of this debt.

After months of careful budgeting I was finally able to clear my credit card debt. It wasn’t easy and here are the things I wish I had known before I got my credit:

• A credit card is NOT free money. When you buy something using your credit card, you are using the bank’s money, not your own. So, it’s like a loan, but with much higher interest rates than a secured loan.
• Never charge more on your credit card than you can pay back in full at the end of the month. The minimum monthly payments can be temptingly low, but when you don’t pay your credit card balance in full, you will incur interest rate charges which can be very high. It’s a good idea to set your own limit on how much to spend using the card each month based on what you can afford to pay when the bill is due.
• Keep a low level of debt at the most. Even if you’re not able to pay your credit card bill in full each month, try to pay as much as possible to avoid spiralling interest charges.
• Always make payments on time. If you are late on a payment, you will be charged a late fee and may be subject to other penalties.

So, there you have it – lessons learnt about credit cards. Don’t get me wrong – credit cards can be useful, especially in emergencies, and for buying something slightly more expensive items my salary comes in. However, beware of simply swiping without thinking about how much your bill will be later. I still use my credit card, but now I am more careful with how I use it.