To Have or Not To Have

Imagine my shock when the credit card company staff answered, “1 million pesos, Sir.” My classmate, at the then Graduate School of Business of the De La Salle University, just asked how much the credit limit is when he was offered a platinum credit card. I whispered, “It’s more than enough to buy a car!” We were attending a students’ party at that time. And this was more than 10 years ago.

What will you do if you’re given P1 million in credit line?

I know what I will do if given a P100,000-limit credit card. Almost 15 years ago, when I was working for Meralco, I got my very first credit card. The next day I went to a computer shop and bought a laptop for P75,000. I converted the purchase into an installment payment plan. I must have been a very good payer that when it came time to renew the card, I got a higher credit limit — P350,000! I was 24 then. I blew it all on shoes and clothes, well, ok, on fancy coffee, too.

I woke up one day to find my mid-20s self in P300,000 debt with nothing to show for it. I called my credit card company, asked them to stop my card, agreed on a payment plan, and gave them a year’s worth of postdated checks. A year after I was debt free.

After the emotional roller coaster of working just to be able to pay for my credit card debt, I decided credit cards are not for me. I just don’t have the emotional discipline to use it properly. Yes, it is easy to tell yourself you’ll pay all the outstanding balance when it becomes due, but it is another thing to actually do so. Also, for my younger self, a young woman who was as impulsive as its present version, a credit card is just too much temptation. My younger self found it near impossible to walk out of a shopping mall without a new pair of shoes or two while now, I find it difficult to pass by a bookstore without buying a book. Same discipline (or the lack of it), just different objects of desire.

I am not preaching that credit cards (and debt, for that matter) are BAD. On the contrary, if used properly, they can be very beneficial.

Let’s take for example a very good friend. Let’s call him Cole. Cole religiously pays the outstanding balance of his credit card (with a credit limit of P150,000). He uses the card for everything — shopping, eating out, and even paying for his hotel bills. Then few months ago, Cole was hospitalized for an emergency surgery. Guess what he used? His credit card. For Cole, this financial tool was a lifesaver while it almost ruined my life. Cole has the discipline necessary to use his credit card properly while I don’t.

The other day, Cole and I were talking about credit cards. I mentioned I see the point of having a credit card for purchase of big-ticket items like television or refrigerator. But the devil’s advocate in me argued if you can’t afford to pay a P50,000 television or a P80,000 refrigerator in cash, then you are not in a financial position to buy it in the first place. After all, a television or a refrigerator or any other big-ticket items are not impulse. You just don’t wake up one day and tell yourself you absolutely have to have a new TV or a new ref. These big-ticket items are commonly planned for. Do you think you can still live comfortably in the next 12 months if you can’t get that item right that moment? If your quality of life doesn’t change, then you may want to consider saving up for the purchase rather than using your credit card and promising yourself, “Installment naman e. Babayaran ko naman agad-agad.”

Now, of course, it’s another matter if your refrigerator broke down and totally gave up on you. This can be flagged as an emergency. Whip up your card and buy the most affordable model and not the 2-door you’ve been dreaming of that costs as much as a secondhand car.

By all means, get as many credit cards and as high a credit limit as you can. As long as you pay your outstanding balance at the due date, you should be fine.
Credit cards are a financial tool. And just like any other tool, it is inherently neither good nor bad. It is up to you, the credit card user, how it will be used. You can be like my younger, impulsive self or you can be more like Cole.