How to have a healthy relationship with your credit card

Cultivate the right money mindset that works for you 
By Hannah Jo Uy

Mind the plastic because credit cards aren’t free money

Getting your first credit card is one of the many milestones that come with being an adult. Without a doubt, credit cards are an important instrument that provide a lot of benefits. It offers convenience as well as an added layer of safety by mitigating the need to carry cash when travelling or even for day-to-day purchases. 

But with “great power comes great responsibility” and a credit card can also be a slippery slope that can derail one’s entire financial future if left unchecked. It’s important to identify the intangible, invisible responsibilities that come with that plastic It takes a bit of self-reflection to make sure that your credit card works for you, and you don’t become a slave to it. Here are a few tips that can help you develop a healthy relationship with your credit card. 

Have a clear understanding of what your credit card offers

A credit card does not provide free money. I repeat. A credit card does not provide free money. This may sound so basic, that it shouldn’t even be worth mentioning, but you would be surprised how easy it is to forget. The subtle psychology behind credit cards has been widely studied by researchers in the field of human behavior. In an article published by Spectrum, Drazen Prelec, associate professor of marketing at the Sloan School of Management, pointed out that “credit cards disconnect the pleasure of buying from the pain of paying”. New card carriers are especially vulnerable, as they tend to be a little trigger-happy with unnecessary expenses, only to suffer from buyers’ remorse when the bill comes at the end of the month.

Without the physical effort of handing over your hard-earned cash, it’s up to you to mentally curb your impulse purchases so you don’t spend more than what you are able to pay, because you are going to pay for it. Make sure you never spend more than what you can afford to pay off at the end of the month or else deal with potentially astronomical interest rates from an outstanding balance.

Know limitations—your card and for yourself

Reflect on how your credit card can help you in the context of your lifestyle. When will you use it? Will it be for bills and, if so, will these bills be auto-debited? Is it for day-to-day expenses like transportation and food? How much will you allocate for credit card payments at the end of the month? You may not have all the answers right away, but it is important that these questions are asked in the first place and develop a plan what you will use your card for. 

Don’t be afraid of the fine print 

Bank statements can be intimidating. All the numbers, figures, percentages, and financial jargons can be a bit overwhelming, and it’s easy to toss the monthly statements aside. However, there are many things in the fine print of these statements that could harm you if ignored. 

Take the time read the fine print, from the initial letters stating terms and conditions to the monthly statements, so you can have a firm grasp of the charges associated with your card. 

Don’t forget that making the effort to read the fine print can also be hugely beneficial when it comes to getting to know the perks your particular card can provide you. This can range from having access to an airport lounge when you are travelling or gift certificates after a certain amount of points are accumulated. 

Be mindful of the schedule 

Be mindful of the schedule. This includes the schedule of repayment, cut-off periods, and monthly billing cycles. It’s easy to be careless on this aspect, when you are balancing more pressing bills, but being careless could lead to unusually high fees, even higher interest following missed payments. Don’t pay unnecessary fees just because you didn’t bother to set a calendar alarm on your phone.

While it is helpful to keep these tips in mind, remember, there is no need to fear your credit card. After all, the purpose of the credit card is to be used, just as long as it is used mindfully.