Defeating credit card debt

Malaysian Business, Sep 16, 2007 by Rajen Devadason

MOST READERS of Malaysian Business are not poor.

One of the hallmarks of the well-heeled in our society is having current issues of this magazine adorning the racks of their offices and the coffee tables of their homes. So, why am I writing here about defeating credit card debt? I'll tell you:

I've learnt over the years that quite a few individuals who earn hefty salaries or business profits tend to overlook gradually accumulating credit card balances on the personal front. This situation usually arises out of ignorance or distraction:

* Ignorance of the true cost of such liabilities; or

* Distraction arising from being involved in far more interesting pursuits than mulling upon the cost of such seemingly innocuous debt.

Such individuals inhabit every country, including our own. So, to help this geographically diverse but psychologically united group, I recently conceptualised a free six-day online eCourse entitled Defeating Credit Card Debt.

I reckon those same six lessons will also be useful to most MB readers. Therefore, here in thumbnail sketch format are the nuts and bolts of that free course. To get the most out of the information I am sharing with you today, I urge you to jot down (perhaps in a journal or even within the margins of this issue) your thoughts on each point as it relates to your life:

* Point 1 - Intelligent Borrower or Economic Slave?

* Point 2 - Escaping Debt Slavery

* Point 3 - Credit Cards - Friends or Foes?

* Point 4 - Credit Cards - Fiscal Vampires

* Point 5 - Credit Cards - Beware the Retail Therapy Trap!

* Point 6 - The Psychological Strengths of a Saver

Of course you're welcome to also sign up for this course at either www.freecoolarticles.com/Defeating CreditCardDebteCourseSignUpPage.htm or www.freecoolarticles.com/ giftcentre.htm

But for those of you who want the gist of my ideas on this subject, please keep reading...

Point 1 - Intelligent Borrower or Economic Slave?

Is debt a curse or a blessing?

I believe it is both. The most important thing to understand about debt is that not all debt is created equal. Some forms of debt, such as loan shark debt and out-of-control credit card debt, are harmful. Others, like sound business loans, are beneficial when used correctly.

So I suggest you use some free time today to list down all your liabilities by descriptive name, quantum owed, minimum monthly repayment, and cost of borrowing in APR or annualised percentage rate terms. Once you've done all that, run down your list and mark the loans that are forms of bad debt, which make you poorer, and good debt that makes you richer.

Point 2 - Escaping Debt Slavery

If you've created that list, you will have a full listing of your portfolio of debt. Before we revisit that list, ask yourself if money is your slave or are you its slave?

Those who have subdued money are the ones who have harnessed its amazing power for growth to enrich themselves, preferably in passive fashion that does not require direct, active personal involvement.

If you regularly earn interest, dividends and rental income from assets you've intelligently accumulated, then money is your slave. If you consistently pay out interest, particularly on loans attached to items that depreciate, then you're living in servitude to your `stuff'. And that's not good.

Point 3 - Credit Cards - Friends or Foes?

It's been said that guns don't kill people; people kill people! In a similar vein, credit cards all by themselves don't get people into trouble. We get ourselves in trouble - everyday, in new and fascinating ways.

So, bearing that in mind, are credit cards our friends or our foes?

Our answer depends upon our innate or, better yet, our consciously developed capacity to handle credit. Do we do so badly or well?

Based on my experience, I believe more than 50% of those I know in both my personal and professional spheres manage their credit cards badly. I did so for many years.

Thankfully, the skills needed to handle credit cards well can be learned by anyone with a modicum of intelligence, the capacity to use a calculator, and some discipline.

You see, the key to transforming our negative behaviour into positive conduct is to awaken to the profound truth that each of us has a finite number of years to live. Therefore, by extension, we will earn a finite number of ringgit throughout our short stay on Planet Earth.

The few who use their credit cards wisely grow their stash of money, while the many who don't use them wisely deplete their lifetime earnings by transferring a sizable chunk into the deep, hungry coffers of financial institutions.

Point 4 - Credit Cards - Fiscal Vampires

For those who misuse their credit cards, these little rectangles of (so- called) status and convenience will morph into plastic vampires that suck the economic vitality from your pockets and much joy from your life.

The solution isn't necessarily to eschew credit cards ... except in rare cases. (Just as recovering alcoholics must be vigilant against ever taking even one more sip of some heady brew, lest they slide down into their own private pit of inebriated hell, extreme debtaholics should eliminate all plastic money from their lives and only use cash and cheques.)