What are ten things I should never do with my credit card?

[00:00:00] Ralph Estep, Jr.: Have you ever looked at your credit card statement and felt that pit in your stomach? Maybe you wondered if those impulse purchases were really worth it. I know I have. Or perhaps you've found yourself juggling multiple credit cards, trying to just keep up with the payments. Well today, we're diving deep into a topic that affects so many of us and that's credit card use.

[00:00:21] Ralph Estep, Jr.: And I'm going to dare say it, abuse. Listen. Many of us have been in this credit card hole. At the end of the show, I'm going to tell you my story, and I'm going to give you some specific things you can do to get yourself out of that credit card debt spiral.

[00:00:36] Ralph Estep, Jr.: But before we get into that, let me ask you this. What if I told you that the choices you make with your credit card today could dramatically impact your financial future tomorrow? Does that intrigue you? Well, stick around because today we're answering the burning question: What are 10 things I should never do with my credit card?

[00:01:02] Ralph Estep, Jr.: Now yesterday, we talked about finding joy in the mundane. We explored how God's presence can transform even the most ordinary tasks into moments of purpose and moments of gratitude. And if you missed it, I want to remind you, go back and listen to it. It might just change your perspective on those everyday chores you've been dreading.

[00:01:23] Ralph Estep, Jr.: All right. Well, let's kick things off with a message from one of our listeners. This is a great question. It comes from Belinda, and she writes this,

[00:01:30] Ralph Estep, Jr.: "Hey, Ralph, I've been a faithful listener of your show for months now, and I can't tell you how much it's helped me. But I'm writing today because I'm in a bit of a pickle. I've always prided myself on being responsible with my money, but lately, my credit card debt has been creeping up. It started with a few emergency expenses, but now I find myself using my card for things I know I shouldn't. I am worried I'm heading down a dangerous path. What advice do you have for someone who wants to use credit cards wisely and avoid those pitfalls?"

[00:02:05] Ralph Estep, Jr.: Belinda, I want to thank you for your honesty and for reaching out. That is a situation that listen, I found myself in and I'm sure many people find themselves in, and I'm glad you're seeking guidance now before things get way too far out of hand. Your question is exactly what we're going to be talking about on today's show. Now, speaking of questions, I want to remind you that this show is all about answering your financial questions from that Christian perspective. And if you've got a question you'd like me to address on this show, just head over to justaskralph.com and submit it. Truth is, your question could be featured on one of our future episodes.

[00:02:46] Ralph Estep, Jr.: And when I was looking at Belinda's question, I thought about, you know, what will be a great Bible verse? And I found this one and it doesn't speak directly to credit card use, but I thought it was perfect.

[00:02:55] Ralph Estep, Jr.: And it comes from Proverbs 22:7. And it's one we've used on the show before. And it says this. "The rich rule over the poor, and the borrower is a slave to the lender." Now that is powerful, but it's a powerful reminder of the bondage that debt can create in our lives when we misuse our credit cards. The truth is we are essentially borrowing money

[00:03:18] Ralph Estep, Jr.: we don't have. Oftentimes it's at high interest rates and this can quickly lead to a situation where we feel enslaved to our debts, we're constantly working just to make those minimum payments. But I've got some great news for you today and that's God's word doesn't just warn us about the dangers of debt.

[00:03:37] Ralph Estep, Jr.: It also provides wisdom for managing our finances wisely, and that's what we're going to talk about today.

[00:03:46] Ralph Estep, Jr.: Now picture this. It's a cool autumn morning. I think it was back in 2019. I'm sitting in my office as I often do, I'm preparing for my next client to come in. My next client, I looked on my schedule, is a guy named Barry. Now Barry has been a client of mine for years, walks in, and I can immediately see right away. I could see that Barry had the weight of the world on his shoulders and I've known Barry for years. Barry's usually this jovial guy who always has a smile, always cracks a joke, but today he was different. He seemed really grim, sits down, takes a deep breath, and he says, "Ralph, I'm in trouble." Now, when I hear that, I know I've got my work cut out for me. Next thing he says, is he says, "Ralph, I've got $50,000 in credit card debt, and I don't even know how I got here." He went on to share how he was using his credit card to pay for everything. And the truth is his credit card had grown so large that he was only able to make the minimum payments.

[00:04:45] Ralph Estep, Jr.: Now, listen, I've been there. I'm sure many of the other listeners have been there. He said to me, he says, Ralph, I opened new credit cards because he didn't have any available credit on the existing cards. And then he started telling me the worst situation ever and that's he started missing payments and he was wrecking his credit. The truth is, I looked at Barry and I said, Barry, you're in the credit card death spiral. And he began to share more of his story, but, but I, you know, I could see his, his whole demeanor.

[00:05:15] Ralph Estep, Jr.: He needed to share this with somebody. But as he was telling it, you know, I was right there with him. It reminded me of my past. Because truth is, there was a time when I too was drowning in credit card debt. And I'm going to tell my story later in this show. But let's talk about Barry. Because the truth is, Barry's story is a cautionary tale of how easily credit card debt can spiral out of control. And as he and I talked, I identified 10 critical mistakes he'd made. And these are mistakes that I want you to avoid at all costs. So let's jump right into those.

[00:05:49] Ralph Estep, Jr.: And the first one is this. Never use your credit card for cash advances. I don't care how nice they make it, how great they send you checks, you get your credit card statement, just sign this check and you know, you'll get a cash advance. And see Barry had fallen into that trap using his credit card to get cash when he was short on funds. And what Barry didn't realize, and a lot of people don't understand this. Those cash advances are often at a different interest rate.

[00:06:17] Ralph Estep, Jr.: And usually those rates are sky high. And they normally charge a fee. I liken it to kind of sort of like throwing gasoline on a financial fire. So you never want to use your credit card for cash advances.

[00:06:30] Ralph Estep, Jr.: Number 2 and Barry was doing this. Don't make only the minimum payments. Barry shared with me. He said, Ralph, for months, I've been scraping by only making that minimum payment on the cards. But here's the thing you need to understand. Minimum payments are designed to keep you in debt.

[00:06:48] Ralph Estep, Jr.: That's the goal of the credit card company. By making that payment, you are being kept in that debt. Truth is, when you look at the statement, minimum payments barely even cover the interest. And most of the time, they leave the principal balance untouched, especially, and listen to this one. Especially if you're like burying, you're making late payments because they're adding that late fee on to it. So number 2, don't ever just make the minimum payments.

[00:07:17] Ralph Estep, Jr.: Number 3. This one is crucial for your credit score. And that's avoid maxing out your credit cards. This is exactly what Barry did. He maxed out several cards thinking, well, you know what, I'll pay that one off later. He got into this debt spiral, this credit card debt spiral that I call it. And what he didn't realize is as he was allowing his credit utilization ratio to grow, it was nailing his credit score. I talked about this on a show a couple of weeks ago. And the problem with that is as he was getting over that 30, 40, 50, I mean, the truth is in Barry's case, when we looked at his actual cards, he was at a hundred or even a hundred over a hundred percent of the credit utilization. And he had zero financial cushion for emergencies. I mean, he couldn't use his credit cards because they were all maxed out. And what he had been doing is getting another credit card and then another credit card. And then another credit card. So avoid maxing out your credit cards, but that leads me to number 4. And that's never use one credit card to pay off another. And see, this is what Barry was doing.

[00:08:24] Ralph Estep, Jr.: He had this desperate attempt to juggle his debts. He started using one credit card to make payments on the other. And think about it. I'm going to use this analogy. It's like digging a hole to fill another hole. And all that does is make the problems worse. And trust me, I've been there. I've done that.

[00:08:41] Ralph Estep, Jr.: I'll talk about that later in this show. But you never want to use one credit card to pay off another. I'm going to give a little bit of a caveat to that though. If you are diligent and you can find a better interest rate on credit card B, and you're going to pay off credit card A and close credit card A, then I'll say that's okay, but generally you never want to use one credit card to pay off another.

[00:09:05] Ralph Estep, Jr.: So let's move on to number 5. And that's don't use your credit cards for everyday purchases you can't afford. Now, I want to be careful that you hear what I'm saying here. I'm not saying to not use your credit card for everyday purchases. What I'm saying is don't use your credit card for everyday purchases that you can't afford. And see, this was the trap that Barry had fallen into. He was using his credit card for groceries. He was using those for gas and other daily expenses even though he knew, and this is the critical part. He couldn't pay off the balance at the end of the month. See, that's the key to this whole thing. If you want to use your credit card for everyday purchases, I think that's fantastic. I think that's a good financial decision. So long as you're able to pay off that balance at the end of each billing cycle. Because in Barry's case, he wasn't doing that. And that led to a constant accumulation of debt. Because he was taken to January purchases, rolling them into February. When the statement came, he couldn't pay the whole January statement. So then those charges rolled into March and then the February, you understand, it just kept on going and going. It was this vicious cycle. And in his case, he was opening up another card because he was tapping out those credit limits. So like I said, don't ever use your credit card for everyday purchases you can't afford.

[00:10:23] Ralph Estep, Jr.: Number 6. And this one gets a lot of people in trouble. And trust me, I've been here and done this one. Avoid making large purchases without a repayment plan. And this was one of Barry's biggest mistakes. You know, Barry was out shopping one day. He was at the Best Buy store, and he told me, he says, Ralph man, I've found the coolest new TV. I mean, this thing was awesome. He just tells me about HD this and did this. And, you know, you could stand on one foot. I'm just being funny. But I think he said it was like a 90-inch TV or something ridiculous like that. And that would have been enough, but then he said, you know what Ralph, what I figured is I've also got to buy some furniture. He comes up to Barry and he says, oh, you like that TV? You know what and Barry's, oh yeah, dude. I love this TV. And the guy says, yeah, well, how about some, some nice, you know, theater seating for your house. That's really cool, but I can't really afford that. And the guy from Best Buy and I'm not picking on Best Buy. The guy from best buy was doing his job. He said to Barry, he says, you know the cool thing is Barry? You can put all of this on our credit card plan. But see, the problem is Barry didn't have a plan to repay that off quickly. And the truth is, think about this. The interest on these big-ticket items, they add up fast. Now Barry was also enticed by Best Buy's plan, where they had zero interest for 12 months. And Barry's like, oh, this is great. I'm going to get this new TV. I'm going to get this furniture set. I'm going to be, as my dad used to say, living in fat city. But he didn't have a plan to how to pay that off and he, you know, he liked that 12 months, no interest. But here's the deal. If you don't pay that off in 12 months, all of that interest starts to accrue from day one. And I did an episode about that and I'll put a link to it in the show notes. So again, avoid making those large payments if you don't have a repayment plan. Now my wife and I, we just bought a new Sleep Number bed, and I love this thing. We went on vacation, and I'll tell you I missed it. But we've got a plan we did there. I think it's for them it's three years. No interest. But I've got a plan set up that I'm going to make that payment every month so that the, by the time we get even before the plan ends up, we're going to have it paid off.

[00:12:34] Ralph Estep, Jr.: So let's move on to number 7. And this is another one Barry fell into this pit and that's never miss a payment. And see with Barry, it came down and he was juggling these multiple credit cards. And when you're juggling multiple things, sometimes things get dropped. So in Barry's case he missed a few payments. That triggered late fees and bigger than that, it also triggered what they call the penalty interest rates. And you got to look at your statements. A lot of times these credit card companies, if you find yourself making late payments, it will trigger what they call the penalty interest rate. Which is a higher rate, because guess what?

[00:13:12] Ralph Estep, Jr.: They're taking on more risk now because they start to see you sliding. And when that happened, when he started missing those payments, it made it even harder to manage because not only was he not making the minimum payments, now they were increasing the interest rate, and they were adding on the fees. So again, don't ever miss a payment.

[00:13:32] Ralph Estep, Jr.: Let's move on to number 8. And listen, I've been guilty of this one too, and a lot of people do. Don't ignore your credit card statements. And Barry said, dude, when those statements came, they went right into the drawer. He stopped opening them because they stressed them out. But the problem is by Barry not opening them, he wasn't keeping track of his spending and his charges. And bigger than that, he lost some situations where there was fraudulent activity on his card. And he couldn't dispute the errors because they had been months and months ago. So this is the thing I'm going to say right now. Always, always, always read your statements to consider setting up online alerts, just like with your checking account. A lot of credit card companies now you can set up an online alert that will alert you anytime there's a charge. And a lot of people might say, Ralph, that gets redundant. Yes, it might get redundant, but if all of a sudden you're doing your daily business and you get a pop up that says you spent money, and let's say you live in Delaware like me, and all of a sudden there's some charges from Las Vegas, Nevada, you're going to say, wait a minute, you're going to call that credit card, and put a stop to it before it's too late.

[00:14:41] Ralph Estep, Jr.: Let's move on to number 9. And Barry was guilty of this one too. And that's, you got to avoid applying for multiple cards in a short period of time. Now, in Barry's case, his goal was, he was trying to get more credit. He needed it. He needed it to fund his lifestyle. So he'd applied for several new cards within a few months. What this did was this further trashed his credit report because of those hard inquiries. It lowered his credit score. What did that do? Sure. He might've gotten extra credit cards. But they came at a higher interest rate because all of a sudden, his credit score was lower. So again, avoid applying for multiple cards in a short period of time.

[00:15:20] Ralph Estep, Jr.: And number 10. I can't stress this one enough. You've probably heard me say that before, but it's the truth. Never ever, I mean, never use your credit card for gambling or speculative investments. And see Barry found himself in that trap as well. He shared with me, he said, Ralph, you know, I had this, I thought I could get out of debt. You know, he says I had this last-ditch effort. I want to get out of debt. So he started using his credit card for some online gambling. He thought, you know, if I can, if I can hit it, you know, I can, I can pay off all this credit card debt right away. But guess what? That was a bad plan because then he just ran up more debt. I've had other clients that have used their credit cards for risky stock purchases. And needless to say this usually only deepens this financial hole for people. So I listened to Barry's story. I felt a deep sense of empathy because listen, I've been there. I've been Barry. Maybe some of you have been Barry as well. I remember it was about 25 years ago. I was a young entrepreneur. I was full of ambition. But I was full of ambition. I had an accounting degree, but what they teach you in school is not financial wisdom.

[00:16:30] Ralph Estep, Jr.: So the truth was I was short on financial wisdom. And I thought, hey, you know what? I could use these credit cards and fund my dreams. And I'm going to bridge the gap between that time until I get my big break. And listen. Before I knew it, I was $30,000 in debt. Creditors are calling me. They were calling me all hours and it really challenged my faith. My faith was wavering. And I remember one day I was sitting at my kitchen table one night. I had bills all spread out before me. And I just, I was feeling hopeless.

[00:17:05] Ralph Estep, Jr.: And I said to God, I said, you know, what can I do to get out of this?

[00:17:10] Ralph Estep, Jr.: And God spoke to me. I heard a small voice, and it said reminding me of Matthew 6:33.

[00:17:16] Ralph Estep, Jr.: And what does Matthew 6:33 say? It says this. He says, "But seek first his kingdom and his righteousness, and all these things will be given to you as well." And as I sat there at my kitchen table with a bill spread out, I was feeling terrible, I realized that I had been putting my trust in credit cards instead of God. I thought those credit cards were going to be the answer to the questions, are going to make me feel good about myself.

[00:17:43] Ralph Estep, Jr.: I had been seeking financial security through borrowing.

[00:17:47] Ralph Estep, Jr.: When I should have been doing it through wise stewardship. Because God had already given me so many things. But I sat there and felt sorry for myself. But then I finally realized God's given me so much. And for me, that was a turning point. And I committed right at that moment, I am getting out of this debt, not for my own sake.

[00:18:10] Ralph Estep, Jr.: Because it was an act of obedience and trust in God. I, it wasn't easy. Listen, if you've been in that credit card death spiral, you know it's not easy. It's hard work. It takes effort. It takes time. If you want me to work with you, I'll talk to you a little bit about how I can help you. It took discipline for me, it took sacrifice. It took going to the store and decide not to buy things. It was a complete overhaul of my financial habits. But what I learned is step-by-step, I added prayer, I added perseverance. I climbed out of the dead hole. I started by creating a budget and, and here's the thing. You can create a budget or as a friend of mine I interviewed last week setting an intentional spending plan. But the bigger thing is I created a budget, but I stuck to it.

[00:18:56] Ralph Estep, Jr.: I stuck to it religiously. I cut up all but one of my credit cards and use cash for most of my purchases. In my case, I took on some extra work. And I put every spare dollar towards my debt. And the biggest thing I learned. And if you listen to nothing else I say today, I learned to distinguish between needs and wants. And that's not easy.

[00:19:22] Ralph Estep, Jr.: I found myself often saying, is this purchase bringing me closer to financial freedom or pushing me further into bondage? And listen. I told you this didn't happen overnight. This took three years of hard work. But there was a point where I sat at that kitchen table again, and I was debt-free. And let me tell you this. The feeling of making that last payment was indescribable.

[00:19:47] Ralph Estep, Jr.: Trust me, I've had many clients have said the same thing. It was indescribable. That feeling was amazing. It wasn't just financial freedom I gained. It was a deeper trust in God's provision and a commitment to steward his resources wisely.

[00:20:02] Ralph Estep, Jr.: Now look, you might be saying to yourself, Ralph, that sounds good, but that's not the reality. So, you know, in preparation for today's show, I did some looking at the current landscape of credit card use. And it's scary. These are some recent statistics. Did you know the average American household carries $6,270 in credit card debt? That was amazing to me. And the U.S. Consumer debt stands at a staggering listen to this. $14.96 trillion. And here's the scarier of all of that. Credit card balances accounted for $807 billion of that. But here's the even more sobering statistic.

[00:20:46] Ralph Estep, Jr.: And this one made me upset. Did you know, the average credit card interest rate is now 16.28%? You might ask, what does that mean? Well, that means if you're carrying a balance, nearly a sixth of your debt is growing each year just in interest. And these numbers, they underscore the importance of why using credit wisely is so important. Now, listen. Credit cards can be useful tools for building credit and managing cashflow.

[00:21:14] Ralph Estep, Jr.: I've talked about that. I'm not sitting here and bad-mouthing credit cards. But they can also be dangerous if they're misused. So I promised you at the beginning of the show, I will give you some tips on how to avoid the pitfalls of credit card misuse. And here are a few, I don't want to take a lot of time, but I'm going to hit them real quick.

[00:21:31] Ralph Estep, Jr.: And that is number 1 as I talked about, create a budget and stick to it. You know exactly how much you can afford and spend at each month but don't spend more than that. Now you also, number 2, you can use cash or a debit card for everyday purchases. And then save that credit card for plan purchases.

[00:21:47] Ralph Estep, Jr.: Now, listen, I am not a big fan of debit cards. I did a show a week or two ago about that. But if you are finding yourself in that credit card death spiral, maybe going back to a debit card is a good choice. Number 3. If you've got to use a credit card, this one is a must. You've got to pay the full balance each month. Because that way you're going to avoid that interest.

[00:22:10] Ralph Estep, Jr.: You're going to avoid rolling those charges forward. Number 4. I can't stress this one enough. Set up automatic payments to ensure you never miss a due date. You don't want to be like Barry and making your problems worse. Number 5. Review those credit card statements for any error, fraudulent charges and see where you're actually spending your money. Number 6. I did a show about this a couple weeks ago as well.

[00:22:33] Ralph Estep, Jr.: If you're struggling with debt, consider seeking help from a financial advisor or schedule an appointment with me, and I'll talk to you about how to do that in just a moment. And most importantly, this is a faith and finance show. Just like I found myself sitting at that kitchen table. I had exhausted everything I knew to do.

[00:22:52] Ralph Estep, Jr.: And I'm a finance professional. But this is the time to pray for wisdom in managing your finances. Remember this. Do what I did. Start by remembering it. Everything we have is a gift from God. And we're called to be good stewards of his resources. So Belinda, I know, I haven't mentioned you in a few moments here. But I hope this discussion has given you some insight in how to use your credit cards wisely. And remember. Listen to me on this one.

[00:23:20] Ralph Estep, Jr.: It's not about never using credit cards. Credit cards aren't bad. It's about using them responsibly as part of a larger God centered financial strategy. And listen, if you're feeling overwhelmed by your financial situation, I want you to know there's hope. Whether you're in Barry's shoes, drowning in debt, or like Belinda trying to avoid financial pitfalls, I'm here to help you. I'll then go into right now.

[00:23:46] Ralph Estep, Jr.: I'm going to invite you to schedule a one-on-one consultation with me because listen, I know how to fix these issues. I've been working in this since 1994. Yes. That's 30 years if you're listening today. And I am a hundred percent certain if we work together, you're going to be able to overcome these difficult issues.

[00:24:02] Ralph Estep, Jr.: This is what I do every day. That's my passion. And listen, I can't work for free, so I do charge $150 consultation fee. But I will work with you one-on-one to create a personalized plan to improve your personal finances. Maybe it's not credit card debt. Maybe you're looking for somebody to help you grow your business or do the accounting for your business. My goal was to help you achieve all your financial goals. Just head over to askralph.com.

[00:24:28] Ralph Estep, Jr.: Click on the banner that says, book a call with Ralph. And then just fill in the blanks. And together we can create a roadmap to financial freedom that aligns with your faith and values. They might be saying, Ralph, I don't have $150 to spend. I get it. But I can guarantee you this and I'll stand by this. I'm certain you'll save hundreds more than that consultation fee.

[00:24:53] Ralph Estep, Jr.: In fact, I'll guarantee it. If you don't find at least $150 in savings after our call, I will refund the consultation fee.

[00:25:02] Ralph Estep, Jr.: I don't know how much else I can say that. You will find value in this. Work with me, we'll work together, and we'll get you out of this debt spiral, this debt hole, because there is hope. Now, before I close, I want to give you a sneak peek of tomorrow's episode. Tomorrow we're discussing what are the 7 top debt collection scams to avoid? I got some stories for you tomorrow.

[00:25:23] Ralph Estep, Jr.: You don't want to miss this one. It could truly save you from falling victim with some pretty nasty schemes. So remember this, my passion is to help you achieve financial success. I want you to live out your dreams, and I want you to grow in your faith. I know, working together, we can master your finances from a Christian perspective. So as I always say, stay financially savvy, and God bless you.