How credit cards work

Many people, too many in fact, don’t completely understand how credit cards work. Sad, but true, especially considering that credit card companies practically BEG you to apply for them and then give you REWARDS for using them. Who can refuse, right?

Well, YOU can and you must.

Here’s a simple video that shows you the process from start to finish just in case you don’t understand. And it’s completely OK not to understand! None of us were ever really taught this stuff.

The most important aspect of using a credit card to buy something is to follow this simple basic financial principle:

If you can’t afford it in cash, you can’t afford it at all!

If you can't afford it in cash, you can't afford it at all.

Basically, what this means is that if you don’t have the funds to otherwise purchase the item you want to buy using your credit card, you can’t afford it…period.

Back in the day before human beings (and especially Americans) got into trouble using credit to purchase things, people would ‘save up’ to buy the things they needed and wanted. They took great pride in putting a little money away on a regular basis and when the day came that they had the money saved up to buy the thing (car, house, bike, etc.), they were so proud of their accomplishment.

If you really want to get to a place of financial security, let alone financial freedom, at some point in your life (if you’re not there yet), you must ascribe to this principles starting right this second.

It’s not a hard thing to do…IF you know why you want to be financially security in the first place.

Let me give you an example of what I mean by knowing your WHY. I love chocolate BUT when I eat it, it keeps me awake at night. I LOVE sleeping more than I love chocolate so when I think about eating chocolate, I think, “Chocolate equals not sleeping and not sleeping equals not feeling my best.” Once I walk through that in my head, you couldn’t pay me to put a piece of chocolate in my mouth. It works like a charm every single time!

The key is succeeding at not using a credit card is to simply ask yourself this one important question next time, EACH time, you think about buying something on credit..

Can I do without this (fill in the blank) today?

Chances are the answer is YES.

Now, here’s the key…WALK AWAY FROM THE ITEM!

Get out of the store, stop browsing online, sign out of Amazon, tell your girlfriend you’d rather go for a walk. Whatever it takes to help you walk away.

Once you walk away, I can pretty much guarantee that you probably won’t think about the item again.

BONUS TIP: take the money you were about to spend, write your savings account or financial freedom account a check and put that money away for later because I promise you that ‘later’ comes a whole sooner than you’d ever expect!

Elisabeth Donati is the owner of Creative Wealth Intl., LLL, creator of Camp Millionaire, Moving Out! for Teens, The Money Game, Celebrating Women and Wealth and several other financial education programs, products and services. She was the recipient of the 2010 Financial Educator of the Year Award from the National Financial Educators Council. She is known as The Financial Literacy Lady. She is author of The Money Jars: Your Magical Money Management System, The Ultimate Allowance, and co-author of Rocks to Riches for kids. Her blog, Financial Wisdom with a TWI$T, is a great place to start learning to think differently about money and investing.Elisabeth is an expert in teaching the basic financial principles people need in a way that is engaging, empowering and fun. For information, visit www.CreativeWealthIntl.org or www.ElisabethDonati.com or call 805-957-1024.
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