Before leaving home to attend university I decided to apply for my very first credit card through TD Bank. I was approved with a $6000 credit limit. Having my own credit card made me felt like a grown up.
When my dad heard the news, he sat me down and gave me one of the best financial advice that I have ever received.
"Tawcan, treat your credit card as if it's a debit card. Always pay your balance in full and only spend what you have."
The idea is so simple I wish everyone knew about this!
Credit card is not a magic card that allows for endless spending. You will always need to pay back what you owe. Some people get into credit card debt because they don’t understand this simple concept. Instead of paying the credit card balance in full every month, some people only pay the minimum amount required and keep on spending.
When this happens, your credit card company gives you a giant smile and thumbs up because you are now their favourite costumer. They begin charging you an interest for the amount you owe. The interest is usually 19% or greater and the interest is charged on the day you buy the item, not on the day your balance is due! Did you ever think that the credit card company was on your side? Think again. Why do you think so many companies offer credit cards? Because it is easy money for them!
If you don't ever pay your credit card balance in full, you’ll always end up having to pay more than what you initially spent. Imagine charging $100 on your credit card and then have to pay an additional $100 of interest. Ouch! No wonder some people can’t seem to save money!
If you have a credit card do yourself a favor and always, always pay your credit card balance in full each month!