At some point in our financial journey to becoming better stewards, we must ask ourselves an important question:  can we or can we not handle a credit card?

The jury is still out on this one..I have heard all kinds of opinions on credit cards, some would say it is perfectly fine to have one, yet many have shunned the thought of plastic for life.

The challenge here is not to ask whether or not you should have the card, but rather, whether or not you have enough discipline.

It takes a long hard look in the mirror to ask this question, and many people are just unwilling to accept the fact that they truly lack this character trait in their lives.

Discipline is always about having the end goal in mind, thinking about what’s ahead, rather than what is right in front of you. Taking the time to perfect your habits, in order to achieve greatness down the road.

E.M. Gray once said, “The successful person has the habit of doing the things failures don’t like to do. They don’t like doing them either necessarily. But their disliking is subordinated to the strength of their purpose.” 

First, I want to give you a few questions to help you decipher whether or not you have the discipline. Go through each of these, and keep your answers in mind. Later on, I will cover in each of the points why your answers are crucial to give you a better grasp of this concept in your own life.

Question 1: Do I use my card as a crutch?

When you have to make a big purchase, or simply a spur-of-the-moment buy, is your first instinct to grab for your card? Do you think twice about the thought of having enough funds to pay for that purchase in your regular bank account, or do you just use the card automatically and worry about it later?

Question 2:  Do I have trouble paying off my full-balance every month?

Do you find it difficult to pay of the FULL amount on your bill every month, not just the minimum payment? Do you carry a balance on your card that is accruing interest?

Question 3:  Do I buy more with credit than with cash?

Are you more prone to spend when you have your credit card with you than if you had cash? Is it easier to think you can afford things?

Question 4: Do I get close to my credit limit every month?

When you look at your credit card bill, are you nearing that maximum credit line every month? Have you asked for a cash advance because you couldn’t come up with the cash on your own?

 Question 5: Do I look at my credit limit as if it were cash in a bank account?

When you see a $5,000 credit limit on your credit card, do you say to yourself, “Hey, I can spend $5,000 this month and be fine.” Do you look at that credit limit as if it were simply cash that you were free to spend?

Now, let’s look at what your answers might be saying about you, and if you need to work on keeping or getting rid of that piece of plastic, or possibly, multiple plastics?

Question 1: Yes

If you said yes to question one, you are treading dangerous waters. Many people are guilty of this very fact, and their card has become such a crutch to them, that they don’t even think twice about spending on ANYTHING. They know that their card will have their back, so they are free to spend, and free to drain their bank account.

Remember what I said about discipline earlier? It means sacrificing the here and now to get better results later.

If you find yourself using your card as a crutch for spending, it may be time for you to get rid of it and try to stand on your own two feet. It is never good to rely on a credit card, because in reality, you are digging yourself into a pretty big hole that will just get deeper and deeper.

Question 1: No

If you replied no to this question, you are probably using your card in good moderation. You may be only using it for special purchases, or on the occasion that you are in a rush and don’t have the cash on hand. This kind of spending is OK, but don’t be hasty to use the plastic just because you passed this test, the other questions will tell a lot about your spending also.

Question 2: Yes

One thing that should go without saying is that MANY people are VERY good at spending more than they make. If you are taking in less than what is going out, you are probably carrying a balance on that card. I want you to look at your credit card statement for me. Make sure you know the difference between the minimum payment and the full amount owed. There is  BIG difference between the two, and if you are caught just paying that minimum payment every month, before you know it, thousands of dollars in interest will be accruing. If you answered yes to this question, it is important that you start basing more of your spending on CASH rather than credit.

Question 2: No

This is a very good place to be. Keep yourself paying off the FULL balance every month, and don’t waver. One month of missing the ball can mean many months of being punished with interest, and that is not a fun place to be. This is where discipline truly comes into play, because you will always need the habit of paying off the full balance if you want to enjoy a debt-free life later on.

Question 3: Yes

Even if you answered no to this question, you are probably lying to yourself. This has been the biggest question that I struggle with in my life…

I have heard the statistics time and time again, People with credit cards spend 15% more than people who don’t have credit cards.

And you know what? I believe it.

It’s so easy to spend with a credit card, you just pull it out at the register, and before you know it, you’re on your way out to the car.

It sounds silly, but using cash is “harder”, so it will cause you to spend less. Just picture with me that old lady in front of you in the Target line when you are trying to just buy a pack of gum. She is counting out EVERY single penny, and all you can think about is getting out of that store!

Yes, it is a little bit harder to plan and have enough cash on hand, but if it helps cut your spending…why not?

Question 3: No

I’ve got to be honest with you here…read the above answer!

Even if you are not a big spender, you might be spending more than you think with that credit card.

Does this mean you have to get rid of it? I don’t know…

It all comes down to HOW MUCH you are spending, and if you can afford a few luxuries in life. If you are running a very tight budget, which many of us are these days, you probably should think about the benefits of having cash instead.

Question 4: Yes

Be very careful of this…if you are finding yourself nearing your maximum credit limit every month, you could be hurting your credit score.

The goal for you in this area is to stay under 30% of your credit limit every month. I know what some of you are thinking…WHAT?!

If this means having two credit cards, then so be it. It is better to stay under that limit than to be nearing your maximum every month.

You know what this says to creditors? That person relies too heavily on credit, and they can’t make it on their own.  

Even if you are paying the balance off every month, it can still greatly affect your credit score, and you should be doing everything you can to make that better!

There is another option: If you are faithful in paying off your balance every month, you can ask for a credit line increase. Recently, I did this with our credit card, and they increased my credit line by $1,000!

This can help because instead of trying to stay under 30% of $1,500, I am now trying to stay under 30% of $2,500. See the difference? More room to use it if I want to.

Question 4: No

You are doing the right thing here, but make sure you are still not carrying a balance on that card. Carrying a balance will also hurt your credit score, and like I’ve mentioned earlier, you definitely won’t be happy about the interest!

The same rules apply as above, even if you are not near the maximum, try to stay under 30%. If you can’t stay under this, you are running the risk of hurting your credit score. Discipline yourself to only use 30% of what your card will allow, and you will be happy to see your spending go down along the way.

Question 5: Yes

The main point to remember here is this: A credit limit is not cash. And therefore, you should not treat it like cash.

The difference between a credit limit and cash is simple, one is yours, and one is not.

A credit limit is not the same thing as your own hard-earned money. It is actually that company’s money, that they think is the minimum amount they can trust you with. You can’t look at it as if it were cash, because it simply is not, and when you are spending on a daily basis, you need to be using your own money, not someone else’s.

Question 5: No

If you answered no to the question, you have taken the right direction with your perspective on this. Although it can be hard for many people to look at their credit limit from the right set of glasses, you don’t have difficulty with this, and you know it is not your money to spend. The challenge now is to think outside the box, “Even though I have the money to cover this entire credit limit, I will only spend what I need in order to become a good steward.” Now that, takes real discipline!

 

I hope these questions helped you on your journey to stewardship, and remember, even if you answered yes to a few of these questions, there is still time for progress and change.

In the end, there is no clear-cut answer on whether or not you should use a credit card. I will never go as far to say that people cannot have them for the rest of their lives, because I simply don’t believe that. If you have practiced discipline, and know when and when not to use your card, I believe you can still have those freedoms within moderation.

Once you gain the right perspective on credit cards, it will be much easier to stay within your limits, and you will begin to see some real, purposeful discipline in your life.

 

By: Erika Pizzo