As Americans, we are no strangers to credit card debt and, that’s pretty unfortunate. The truth is, this debt is the result of wide spread abuse of a financial product that was designed to be a great tool used for the building for financial stability! To understand why I say this and, how to properly use credit cards, you will have to go back to when and why credit cards were created in the first place…
A Brief History Of Credit Cards
In the early 1950’s, a charge card customer of the Hilton Credit Corporation ran into a problem. He allowed a few of his friends to use his charge card to make purchases that they promised to pay back soon. Knowing that with charge cards, you cannot carry a balance from month to month. This month, this customer had to find a way to come up with more money for his charge card bill than normal. Unfortunately, he was unable to do that and had to default on the terms of his agreement with the Hilton Credit Corporation in regard to his charge card. He now had to slowly pay the balance late, with penalties!
One of the managers he spoke with was Mr. McNamara. Being bothered about having to impose penalties on such a consistent customer, McNamara brought this unfortunate instance up in a lunch meeting with Mr. Bloomingdale, founder of the Bloomingdales store and Mr. Snider, Mr. McNamara’s lawyer. The hopes of this conversation was to find some kind of solution that would help consumers in the same position who, would have the money to pay their debts for sure but, needed more than 30 days to do it. Thus, in this conversation, the credit card was born.
How Consumerism Destroyed The Concept Of Credit Cards
Credit cards were designed to be a financial tool that was only to be used when consumers had a surefire way of paying the debts back in a short period of time. They were not designed to be used on a day to day basis to purchase things like gas, fast food and other frivolous products. Unfortunately, our consumerist society has caused it to be more and more enticing to use your credit card for these types of purchases. 10% off your gas when you use your gas station card and 20% off your purchase today when you sign up for our credit card promotions are grinding day to day use into the life line of today’s society!
As humans, we are hard wired to do what we are told. We do it as kids and as adults and often, we do what we are told by salesman and other promotional tactics. Unfortunately, in this case, doing what we are told has lead a large percentage of us into overwhelming credit card debt!!! With that said, here are a few precautionary measures you can take to avoid overuse on your credit card:
Avoiding Credit Card Overuse
Step #1: Set A Spending Budget – If there are purchases you make throughout the month that require a credit card, you should set a monthly credit card spending budget that you can afford to pay off each month. By tracking what you spend and not spending more than your limit, you are always sure to pay off your balance monthly!
Step #2: Before Sliding Your Card, Make Sure It’s A Good Idea – Any time you find yourself in a position where you are going to swipe your credit card, ask yourself, “Do I need to make this purchase?” and, “When will I be able to pay this purchase off?”. Your answers will help you decide if using your credit card is a good idea.
Step #3: The Option For Those Of Us With Little Control Over Spending – Although, I grew out of the phase, there was a phase in my life that if money was available to me, I was going to spend it without any control. If you don’t trust yourself to not use your credit card unless you have to, there is an if all else fails step! Simply fill a plastic bag with water and put your credit card in it. Now, throw it in the freezer. If it’s a frivolous purchase, you wont want to go through the hassle of thawing and cleaning the ice to use your card!
Credit cards were designed to be great financial tools. However, due to consumerism and over-use of credit cards, these tools are now being looked at as financial evil!!! I hope that this article has helped you to understand what credit cards were designed for and that it inspires you to use your credit cards properly! Thanks for reading everyone and come back soon for more on personal finance topics with Penny Pinchin Mom and Joshua Rodriguez!
About The Author – Joshua Rodriguez
This article was written by Joshua Rodriguez, proud owner and founder of CNA Finance and avid personal finance writer. This article was inspired by Joshua’s most recent series about balance transfer credit cards and understanding the option. Join the discussion about this article, Joshua’s series or any personal finance topic of your choice on Google+ and facebook!