Card Conditions: The difference between sinking or swimming

This morning I dropped my car in for its major 100,000km service and to get four brand new tyres put on.

I know it doesn't sound like much to blog about, but something is going to happen when I pick my car up at 5:15 this afternoon.

I am going to use my first credit card for the first time.
You might be thinking so what? big deal, thousands of Aussies use credit cards everyday.

But it is a big deal for me. Working in a debt management company I am exposed to all kinds of inside knowledge about the dangers of having and using a credit card.

In more cases than not, a credit card is the major culprit behind so much stress and sadness brought on by debt.

So with all this inside knowledge why would I want to expose myself to a dreaded credit card debt? The honest answer is, I can't afford not to.

The Truth

My car is now due for it's 100,00km service and four new tyres. Looking at my budget, it would take me two months to save enough money for this rather costly expense. But as I drive 40 minutes each way for work five days a week, my poor car can't wait it out for another two months.

The Deal

The only way I allowed myself to apply for a credit card was to abide by a few conditions devised specifically to keep me from abusing the card and going into debt. From what I have seen in my job, I was able to pin point a few aspects of the 'spending with a credit card' process which seemed to keep getting people in trouble. So hopefully sticking to these rules will help me afford my immediate expense without develooping a nasty spending habit and an even nastier debt.

The Soap Box

I thought to myself, if these rules can help me stay out of debt, hopefully they can help several others in my position do the same. So I am going to share them with you here. Please keep in mind that I am by no means a financial specialist, just a young Aussie adult trying to figure out my finances with a little bit of help on the way.

Card Conditions

1. My purpose for this card was to pay for a car service. With this purpose in mind I set out to find a card which best suited my situation. In this case, the card I went for came with a 6 month interest free term, no anual account fees and a reasonable interest rate. I could have opted for a card with a lower interest rate, but they generally have higher fees. Because I am only going to be using my card for my car purchase, I will pay it off within the interest free period so the higher interest rate doesn't come into play here. If you are going to use your credit card frequently, it might be worth paying minimal anual fees for a reduced interest rate.

Lesson: Think about how you are going to use your card BEFORE you apply for it.

2. I rang my auto technician and got a quote for the job ahead. Knowing how much my purchase was going to be I was able to start factoring the repayments into my budget straight away. Knowing I could afford this service in two months time, I divided the cost of the service into a weekly amount over two months. It took 10 working days for my card to arrive, so I have already saved up two weeks worth of repayments.

Lesson: Ignore the minimum repayments. Pay off your credit card debt as soon as you are able. Factor an amount you can afford into your weekly budget and stick to it.

3. Once I finish paying off this purchase I am going to continue to pay my weekly repayments into a savings account until I have paid for my service once over. This way, next time I need to have my car serviced I will have the money when I need it.

Lesson: Savings accounts are much more user friendly than credit cards.

4. Once I have finished with this card I am going to hide it in a draw for six months. In that time I am going to save as much as I can into an emergency fund. After six months I will have enough in my emergency fund to cover any unexpected costs so I will cut up my card.

Lesson: Credit Cards cause emergencies, they don't resolve them.