Don’t be crippled by credit – On the Money with Jarryd Neves

Jarryd Neves
On the Money. Budding stock market investor Jarryd Neves, of BizNews, sends out an invitation to everyone who wants to ask questions about share investing – but is too embarrassed to ask. Write to [email protected] And tune in for his regular Monday column: On the Money

I’ve always had an issue with the way television and media has glamourised credit cards. Take the hit HBO show Sex and the City, for instance. The viewer follows the story of an infinitely fashionable ‘it girl’, who wonders around New York City in expensive clothes, shoes and accessories.

As a columnist, the main protagonist is definitely not earning big money, yet her lifestyle is inexplicably lavish. Her U$500 Manolo Blahnik shoes are charged to a credit card, before she sets off in search of yet another twisted metaphor and tired joke. One episode briefly focuses on her realising she’s in debt. But instead of actually showing the ramifications of crippling debt, it’s downplayed and turned into a joke.

Suddenly, our well-dressed hero is out of debt and back to spending. Now, this is just an example (many other shows do it too) – and I know we shouldn’t be so easily influenced by the media – but the truth of the matter is that we are.

Credit cards are now offered to almost everyone, with amazing ease. At 18-years old, I needed to apply for a credit card in order to rent a car. I was astonished at a) how quickly credit was afforded to me, and b) the amount of credit I was being offered. At 18, I had a part-time job and nothing in the way of assets (apart from a decrepit Mercedes).

If it’s that easy to obtain access to credit, no wonder people are finding themselves in debt. Not only do we have mainstream media shoving the ‘convenience’ of credit cards in our face, but they’re advertised to appeal. Credit cards are often marketed with enticing lines like ‘own it now’ or ‘let your credit card take you there’, without any of the reality that comes with paying them off.

The temptation to overspend will be too strong for those without the willpower (or understanding of how credit cards work). All that money, at your fingertips – you don’t even have to think about paying it off. That attitude can feed an addiction, to spending money that isn’t yours.

Unless you’re paying off your credit cards in full each month, interest will rear its ugly head. If, for example, you’re just paying off the minimal monthly payment you’re really just servicing the interest payments. This makes your journey to becoming debt-free a lot more expensive and time consuming. If you cannot afford to pay the credit card off in one fell swoop, pay as much as you can.

While you may be managing your debt now, there may come a time where servicing your credit card debt is becoming increasingly difficult. Being in debt is a place no one wants to be, particularly in a risky financial climate such as the one we’re seeing. Not only can debt lead to potential financial ruin, but there are side effects that can mess with your health, too. Debt can cause increased stress and even depression.

The importance – and necessity – of credit cards all make sense when it comes time to apply for finance. Most people purchase their cars and homes through a payment plan (car instalment, bond) as few can afford big ticket expenses in cash. Credit cards are a handy way of building a good credit score, providing you use them wisely. However, poor decisions and reckless spending can also see your credit score going the opposite way. While it may not seem important to you now, a good credit score could be what stands between you and buying your dream house one day.

So, credit cards. They’re a necessary evil, glamourised by media and society as a quick way to get what you want, when you want it. Use it that way, and you’ll find yourself straining under a mountain of debt. Use them wisely, however, and it could be to your benefit when applying for finance one day.

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