Should Freelancers Stay Away From Credit Cards?

by Rico on June 4th, 2008

Over a month ago, I recently got my first credit card. It was actually enjoyable to just sign for purchases, instead of paying cold hard cash. It was just more convenient that way.

I’ve Spent Too Much

Unfortunately, the amount I’ve currently spent is surprising. Don’t worry, the problem isn’t grave. But it’s still surprising how a credit card can wreck a carefully planned budget. For some reason, plastic doesn’t leave you with a feeling of how much you’ve paid, and the danger there is that you might charge yourself into a huge credit debt.

I’m now thinking of leaving the credit card at home, but that would rob me of the payment convenience I crave, not to mention the safety of keeping your cash at the bank. Yet I’m not so sure if I can control my spending either.

Controlling My Spending

This is a call for help fellow freelancers: are there any basics credit card holders can utilize to control their plastic habit? Here’s what I’ve figured out so far:

Keep track of all your purchases. Add them up in a spreadsheet, and add new items as you charge for them. Credit card transactions always leave you a receipt; this will help you tally up your spending and see if you’re over-doing it.
Don’t always bring out your credit card. The plan is to just use the card for absolute necessities such as food, fuel, and equipment.
Have your credit limit lowered. I’m not sure how easy it is to do this, but I’ve heard that you can ask your card company to reduce your credit limit.
Pay off the debt in time. Credit card companies make money off the interest generated by customers who don’t resolve their debt on time. That’s why the rates are high.

The danger of debt is particularly troubling for freelancers I believe, since the lack of a relatively stable income may limit the capacity to pay back any debt incurred.

A Sign That Credit Cards and Freelancers Don’t Mix?

And by the way, if you’re wondering how I got my credit card, it was through my company. My day job provided all the documentation and created a stable impression that was enough for the card company to approve my application; I wonder if I would have had the same luck if I was earning exclusively from freelancing. Maybe this is another reason why freelancers should stay away from credit cards?

Image courtesy of woodsy.

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