It’s very common when I’m talking with new clients that when I ask them how much they spend, the answer is “everything”.  When I try and dig a little deeper and ask what they spend their money on, often the answer is “we don’t really know.  We just pay off the credit card at the end of the month, and it’s always bigger than we expect.”

Credit cards are a great idea – a little piece of plastic in your wallet that allows you to buy what you want, when you want it.  If you don’t have the money to buy it, don’t worry, you can buy it now with the credit card and then move the money onto your card when your pay comes in – saves you coming back to the shop a second time.  You can have it now, be happy now, take that snap and post it on Instagram right now.  Every time you buy something, you get points, and those points will give you a free holiday away somewhere – awesome!  Give me more!

But reality is just that little bit different. You can’t always just pay it off the card when your pay comes in because you need that pay to take care of the mortgage or rent, the phone bill and other expenses.  It’s ok, they’ll just charge you a little bit of interest and you can pay it next month – no big deal.  The thing is, you might not.  What you’ve done is you’ve spent your next two months savings, and gotten charged for it.  Credit cards are a great tool if you’re completely to top of your budget, but if you don’t feel like you’re smashing it, maybe it’s time to reconsider what you’re doing.  Here are the top five truths about credit cards that you need to know:

1. Points!

Yes, you get frequent flyer points, and those points get you flights.  Putting things into perspective, you need to spend AT LEAST $240,000 to get two return flights to New York, and with some credit card rewards programs, it’s up to $480,000 to get the same rewards, and you still have to pay the taxes on top of that!  If not having access to such easy credit can save you just 2% on your spending, you’re going to save between $4,800 and $9,600 over the same period.  That pays for more than just a flight.

2. It’s so easy, I couldn’t get by without it

I’ll admit, credit cards make buying things very easy, and is both a blessing and a curse.  There is a very simple answer to that, however – DEBIT CARDS.  They are exactly the same, Visa or MasterCard, work in the same way, and won’t slow you down UNLESS you don’t have the actual money to spend.  A debit card will only allow you to spend money you have, not money you don’t have and that is a very good thing.

3. I’ll have to change all my direct debits

Yes, you will.  Deal with it.  Have you ever bought a new car but been concerned that you’re going to have to change your insurance policy?  Nope.  Have you upgraded to a new phone but then freaked out that you need to get a new case for it because the old one won’t fit?  Not likely.  It’s just a really crappy excuse for you doing something that you really should because it’s good for you.  Seriously, suck it up and deal with it.

4. You can get discounts for not using your credit card

The amount of times I’ve asked the person behind the counter if it’s cheaper if I pay by cash or EFTPOS, and I get an instant answer “sure, you can have $5 off”.  Easy.  There is a broader concept here that you can get discounts on a lot of stuff if you just ask for it, but many shops build in the 1-4% credit card fee into their prices, so if you’re not using a card, don’t be afraid to ask for that saving to come your way.

5. It’s harder to binge

I have always had an issue with food, and for that reason my wife doesn’t buy the food I love (think  biscuits, ice-cream, Berry Donut Van donuts yummm).  Why?  If I see it, I’ll eat it.  Money is the same – if you’ve got it, you’re more likely to spend it.  And what credit cards do for some people is give them the feeling that they ALWAYS have money, even if they don’t.  Getting rid of your credit card might make you feel a little poorer – so do something about it.  Work harder, spend less, or do both.  Eventually, you’ll have some savings that you can spend on what you want (or better yet, invest, but that’s a whole other post).

It’s so easy to live without a credit card, it’s probably easier than cutting out chocolate, alcohol or your addiction to trashy reality TV.  It’s going to take a tiny bit of effort but the benefits, the spoils, will really be worth it.