The lesson I’ve learnt from using credit cards

When I was just 18, I had a credit card that my dad helped me get because he thought it would be a great way to start building my credit. Little did he know that he was helping get into one of the worst financial situations some one could manage to get them selves into.

When my dad and I first walked into that Mississauga RBC branch, the one thing I was thinking about was how cool it is going to be for me to have a credit card that I can swipe all over town and get all the cool gadgets and fancy foods. I wasn’t thinking about what it meant to be in debt, or how interest is going to kill my finances or even how or when I am suppose to pay the bills.

I mean yes of course I knew I had to pay at the end of the month, and I knew what interest was and how it would be calculated, but I didn’t know that there is something called a statement and that there are cycles to watch out for. I was just paying willy nilly and whenever I had some money come in.

As you probably have guessed by now, I went crazy with that thing. I went travelling on it, I bought the newest chrome book at the time, new wardrobe, new shoes, the whole nine yards. And since my father was with me when I applying and getting my credit card, they gave me quite a high limit since my dad probably has pretty good credit, so I was able to shop till I drop without my card ever declining on me.

And here is where I learnt my first lesson, having a high limit is a terrible thing when you are young and just starting out. Your card will always get you what you want without ever letting you down, and it puts you in a position where everything becomes desirable because it is one swipe or tap away from getting it. This is were I did my first mistake, obviously I didn’t realize this until much later and after I have dug myself a pretty nice hole for myself. Just remember just because you can get it doesn’t mean you should.

Impulse control is the first lesson I learnt when reflecting on this experience.

Now going back to what was happening, the next stupid mistake I would say I did at the time was not pay attention to when my statements were coming in. I though I can pay my credit card whenever, whether it was a day after making the purchase or a few weeks later. Never did I ever realize that although I have been making some payments, that some of them have remained from the cycle and that I was charged interest because of them. This is where it hurt me the most. I was paying whenever I would get my paycheck and at random times, never realizing that there are certain times to pay, and how to avoid paying absurd amounts of interest on my purchases. And so the second lesson was understanding when and how to make payments to avoid interest. Figuring this out helped stop myself from going any deeper into the whole I was digging. Now I don’t have to pay extra money for stupid purchases I’ve made, that is like getting punished twice, once for buying useless stuff, the second is for not paying for that useless stuff properly.

Learning how the system for payments work is the second lesson, always be looking for your statement balance first.

The final thing I learnt was that as nice it is to have a credit card and the ability to purchase whatever whenever, you should not be spending money you do not yet have. I think this is the problem with all credit cards, they give you the promise of buy now pay later, but you don’t always now what is going to happen later. I got sick during the time was working and couldn’t go to work for 3 days, and I don’t get paid for the days I didn’t work since it was only a summer job, and so when my paycheck came, I was missing a whole bunch of money. Guess what did that do to my already large and interest accumulating credit card debit. I was working almost the whole entire summer, and by the end of it, I had spent all the money I have made, and was about almost a grand in debt. I was 18 for goodness sake, how the hell did I get myself into such a crappy place so fast. The last lesson I learnt that do not always bank on tomorrow, because you will never know what will happen, and so do not be spending money you do not yet have.

The final and most important one is, Do not spend money you don’t yet have.

Overall while this experience was painful and has hurt me both financially and emotionally, I was lucky to have my parents support me through this so I don’t end up in ruin for the next few years. And although it was very rough, I am very grateful for the opportunity and the lessons I learnt from this mess, I am much more financially intelligent than I would have ever been if this whole fiasco didn’t happen. I now pay my credit cards (that’s right CARDS now) on time, with the right amount, and heck even getting rewards and cashback for being such a good client. Not only that, but now I know how to handle my chequing, saving, and even my investments account properly that it no longer stresses me out as much.

And while it was a great learning experience, I would’ve rather learnt about all this stuff way before I had to lose my hard earned money to learn such lessons.

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