Credit cards are wonderful tools that allow you transact without carrying wads of cash. I’m not really a big fan of the “rule” to pay in cash whenever possible. Unless it’s cheaper to pay in cash, I use a credit card — but not any credit card (well, I only have one, anyway). The credit card we chose allows us to accumulate free miles, enough to get me and my wife free tickets within the Philippines, Hongkong and Thailand. In other words, I gain from using a credit card.

While a credit card (also called “access device”) is a wonderful tool, it could also lead to financial woes. I must say that the problem isn’t limited to credit cards, but applies to all aspects of financial life where lack of control often leads to catastrophe. Credit card collection agents are now using “creative” ways of collecting unpaid credit card obligations, which resulted to the issuance of guidelines against unreasonable collection practices. Those who cannot pay or have a difficulty in paying are complaining against these practices, although all agree that a debt is a debt, and must be paid. The solution, really, is moderation and control. Spend within your limit. As always, however, it’s always easier said than done. Should you decide to use your credit card, please remember the following:

Take control of your credit limit. A higher credit limit is good, as it means you have a good credit standing and can purchase more expensive things. This has a corresponding problem, if the credit card is in the hands of a spender. If you have a hard time controlling impulse buying, a lower credit limit is better because there’s a built-in spending check. For example, if you only have a 10,000 credit limit, which is an amount programmed to be within the disposable portion of your monthly salary or income, you can rest assured that you’ll know when you’ve exceeded your credit limit. Still, being told by the waiter or staff that you’ve exceeded your credit limit, or “maxed out,” is not a pleasant experience specially in front of your family or friends.

Check if it’s cheaper to pay in cash. The DTI already declared that it’s unlawful to charge a higher amount for credit card purchases — the stated purchase price for goods and services must be the same regardless of whether you pay by cash or through credit card. Merchants or sellers, however, employ ingenious ways of going around the prohibition. You’ll notice that the purchase price are the same, but they give you a discount if you pay in cash. If it’s cheaper to pay in cash, don’t use plastic (and I mean your credit card).

Request for a waiver of your annual fees. Banks and credit card companies automatically renew your credit card, also automatically charging annual fees. If you don’t want to spend this amount which you could otherwise use for other purposes, you could request your credit card company to either terminate your card or waive the fees. They do agree to such a waiver; my wife is yet to pay an annual fee for many years now.

Buy when there’s a promo. As sure as the sun rises, promos will be offered. These promotions include payments stretched over 6 or 12 months. It’s buying and in installment, with the convenience of swiping a credit card. This gives you the power to spread your cash exposure to a couple of months. For example, you can’t afford an appliance P20,000 in one month, but you could very well save for that within 12 months. Now, instead of enjoying the appliance in 12th months of saving, you could enjoy that in the first month and during the entire duration that you’re paying for it. Great! Credit cards offer this promo to get an edge in the competition. What’s the catch? Well, you get charged with interest if you’re unable to pay an installment.

Pay all your purchases for the last billing cycle. The beauty of credit cards, for some, is to be able to buy something which you couldn’t otherwise buy with your existing money, then pay only a minimum amount per month. However, when you pay only the minimum amount, you end up paying interest charges for the rest of the amount. In other words, you must pay all the amount purchased in the previous billing cycle. You’re a “deadwood,” which is simply a term used by credit card companies to refer to those who pay the entire amount on or before the due date. Credit card companies still earn from dead woods — through the margin they receive from merchants or sellers.

So, you see, credit cards are just like guns: they may or may not be used for good, depending on the user. If you can’t resist temptation, might as well throw away your cards (after advising the credit card company so you won’t be continually charged with, at the very least, renewal fees). Happy shopping!

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• Republic Act 9510: Credit Information System Act