Money Learning Checklist 3 – Credit

money management


Everyone knows what credit is, right?  It’s a happy word.  Credit, in its contextual sense, has a positive connotation.  Credit connotes having credibility, right?  That’s right, I’m credible – just ask me.  Everyone is credible in their own mind.

Americans love credit and credit cards.  I think some people believe that a credit card is a magic bridge to avarice.  Isn’t it fun to go into a store and not have to look at prices, fill up your cart, and walk out with all that stuff?  Everyone wants to look great and be surrounded with nice things.  But, the big façade associated with credit cards is that once that card is swiped, you have traded your soul.  Your soul is traded for the debt that you just created.

To me, debt is a four-letter word.  Oh, wait it is a four-letter word, but I mean the bad kind.  As I took a break from writing this piece, I saw a political cartoon in the newspaper that expressed my sentiments about credit.  It’s a large image of It, staring down at a person with a caption of “A national horror: DEBT”.  “It” is the star of that gruesome clown movie that continues to break ticket sale records.  I burst into laughter when I saw the trailer.  This is what constitutes entertainment?

The cartoon’s message is likely referring to the country’s national debt, but I easily relate it to personal debt as well.  The Federal Reserve reports the sad condition that 44% of adults wouldn’t be able to come up with $400 to cover an unexpected expense.  While consumer debt is again at a record high, credit usage is a topic that requires daily attention.  That diabolical clown is responsible for ruining the livelihood of every children’s party guest character.  However, the image is consistent with my feelings about debt, and it should be yours too.

Getting back to the credit card swipe, to the extent you can reduce the time frame of the bondage that you just effected, you are exercising the discipline to manage the arrangement. There’s a balance that’s necessary for the arrangement to be beneficial. One side of the equation is obtaining merchandise before you pay for it.  Isn’t that wonderful?  They must really like you.  They’re giving you stuff before you can pay for it.  Isn’t this a great country?

The other side of the equation is your action or inaction in paying for it.  The façade has begun.  Just like the smiling frenemy that walks away and spreads vicious gossip about you, the credit card company is building invisible chains around your ankles by sidling with your indulgent behavior.  What you don’t see is the barbarian that’s issued that credit card and sits and waits for you to use it beyond your means or make a late payment.

If you’ve never thought about it this way, here It comes.  The credit card company is not your friend.  The mortgage banker is not your friend.  Their goal is to keep you in debt as long as possible; it’s how they make money.  If you’ve ever paid less than the full balance owed, you know what I mean.  Fees and mounting interest, the interest that you owe now starts to creep into your life.  The less you have to pay them back each month, the more interest will strengthen the chains around your life.  Then comes the heartache of a poor credit report card.

Read, or re-read, my piece on how your credit history affects your life.

Unless you like bondage, start hating credit.  Only when you have demonstrated how to manage debt appropriately, subdue impulses, and not let credit ugliness drag you down, then credit can be loved.

So, here’s the list for your credit discipline:


Tasks Get your credit score
Understand your FICO score
Increase your credit score
Use cash only
Reduce usage to one or two cards
Keep your balance at 30% of your limit
Obtain a secured credit card to repair a low score
Check your credit card transactions frequently
Books/Magazines Debt Free For Life by David Bach
Websites to follow
Online tools

Related posts:

Money Learning Checklist 1         Earning/Saving

Money Learning Checklist 2         Spending

Money Learning Checklist 4         IRAs

Money Learning Checklist 5         Retirement


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