I remember my first car: a second hand (but really fast!) Lancer L-300. My dad gifted it to me, after a lot of "haggling." We all know such "gifts." They weren't freely given; they were negotiated!
And I guess that's where owning this particular car was a "disaster waiting to happen:" I felt "entitled" to it. I determined that I "deserved" it, had worked hard to make it happen (must've robbed my Dad of the joy of "gifting" me with something!) and now had all the right to use it as I pleased.
Within a few weeks a friend who asked to "test drive" it (with "responsible me" on the navigator's seat), smashed it head on to an innocent Acacia tree in Mandaluyong. It was fun...while it lasted. But now, it was total wreck. We escaped by the "skin of our teeth."
It's been over two decades since that happened, and while my family has had our share of vehicle trouble, we've never, thank God, had a total wreck situation as I did. Most car experiences have been good, many have great, and I know they will get better!
Our material "blessings" and "gifts" were meant to do us great good, not harm. They were designed for our pleasure and to facilitate a higher quality of life for our family and those we were called to bless. And to "facilitate" means to "make things easier" or "less difficult." Things were created to serve us, and not the other way around.
When we steward what is entrusted to us well, we not only multiply what we have, we are able to help others multiply themselves too... for an explosive effect!
Now who would've thought I'd use that vehicle illustration as an introduction to this credit card article!
Consider the parallelisms, for there are many!
A credit card is a gift. A blessing. A trust. Use it wisely, and you are further equipped to live an empowered life. Abuse it consistently, and you clip your wings, if not your ability to move completely!
This innovative payment tool goes back - in similar practice - to almost a hundred years ago in the US when people started carrying steel plates with their names embossed in them which were "imprinted" on charge slips when making purchases. Essentially the purpose was the same: "to make a purchase of goods or services on "credit" with a clear promise to eventually pay for them." A specific component in today's system is the third party card issuer that actually guarantees payment to the store, merchant or supplier based on the card holder's credit limit and payment performance.
Ultimately, the goal is to facilitate or "make easier" transactions between buyers and sellers for which the issuer is paid a corresponding "facilitation fee."
A 3 ⅜ × 2 ⅛ in (85.60 × 53.98 mm) card for more convenience (Go ahead, measure it!)
It is different from an ATM-Debit or charge card where one requires the availability of funds to draw from (ATM-Debit card), and the other, a committed date for full payment of the charged amount (charge card). Further, it is more than just automated, electronic or online banking, and that it isn't just a regular financial transaction that's become more "high-tech" in its execution. You issue an online check on insufficient funds, and that "high-tech" check will still bounce! (It just bounces faster!
What we've seen as distinct benefits of credit card use in our family and business through the years include the following:
1. As already stated, convenience. I am quite a traveler, for business, education, sports, and leisure (it's a family commitment to do this, on a regular basis, together). Just for the first five months of this year, I must've traveled at least a dozen times locally and internationally (and not just one stop each time!). I cannot imagine making all the hotel and airline bookings without my credit card (and occasionally, Maricel's), while preparing for the trip, and onsite, when providing the card at the front desk as a guarantee.
2. Points, points, and more points! As a follow up from point 1, of course, I have secured a frequent flyer credit card given the nature of my business and family travel (Thank you! BPI Express Credit!). Business growth isn't all about more and more customers (market share); it's also about growing your business (or transactions) per customer (share of customer). I am loyal because I know my card company benefits from my consistent purchase ...and this leads to more "incentives" which I and my family can enjoy.
3. Budgeting "grace period." While I fully support the "envelope" technique many financial gurus prescribe as a key to "controlled and budget-based spending," it cannot completely cover all possible transactions involving our home, business and professional commitments. Our credit card purchases, tracked well, give us "breathing space" to make the corresponding allocations to meet our monthly needs (and wants). Cash flow management has more flexibility given our card's payment scheme options, and we are able to ‘stretch’ our budget between paychecks.
4. "Permission" to conduct a transaction! I recall an experience, sometime back, when I realized (too late) that my credit card then (not BPI : ) wasn't accredited by the hotel for payment (that's what you call an "Unaccredited or discredited credit card!" ) It was the only hotel within the vicinity of the business conference and so I didn't have much choice at that time. To my surprise (and shock!), the hotel wouldn't accept cash for my deposit! I ended up having to live "one day at a time," as the hotel was only willing to transact with me on a per night basis (perhaps to remind me they could eject me anytime if I racked up too many charges at any one night).
An inspirational speaker once reminded an audience that there are more Do’s than Don’ts in the bible, and that if we only focused on doing the Do’s, we wouldn't have time for the Don’ts!
Maricel and I are works in progress. And will always be. When we started writing this column, we knew (more than anyone else) that we still have major needs for growth (and repentance) in financial stewardship, credit card use including. Here are, therefore, our 10 "CCCs" or Credit Card Commitments which we re-commit to regularly, and even now as we wrap up this column:
1. Distinguish your needs from wants. And agree on the definition, together!
2. Never max out your credit limit (Never again!). Stay within 30% of limit so you don't "live within the edge" and you maintain or improve your current credit score over time.
3. Always separate symptom from source. Maricel used to (that's past!) spend with her credit card when she was upset with me. Now, she just spends time running (the angrier, the longer!) Some credit card purchases are only solved through counselling)
4. If you have the means, don't just pay the minimum. The interest charges on the balance will negate the benefits of those minimum payments in the long run. In fact, pay your purchase in full before due date if possible. Control it, before it controls you.
5. Track your expenses. You'll be amazed at what it says about you, and your spouse! Your monthly statements make this handy versus keeping a record book/ledger separately.
6. Agree with your partner on purchases for a specific time period. That's called budgeting. Agreed-upon-budgets must eat credit card purchases for breakfast!
7. When in crisis situations, remember the Triage technique in dealing with patients in war: first address those things you will lose if you don't solve first; next, address those things you maximize by dealing with them accordingly; finally, address those you know you cant do much about but you still can "comfort" in their dying breath!
8. Look at ways you can proactively negotiate with your credit card company. They are willing to talk, and surprisingly, listen! "Act or be acted upon"
9. The integrity of the credit card company is more important than the "amazing features" of "their latest card offering." "Roots determine fruits." Go with reputable brands.
10. And finally, stick to it. Fall down, and rise again, and again. From our friend Suze Orman, recently flown in by financial giant BPI, and our initial feature in this column, some words of wisdom: "No one’s every achieved financial fitness with a January resolution that’s abandoned by February.â€