Hero or Villain?
Credit card usage began in the 1960s with Bank of America. What started as an experiment forever changed the trajectory of our financial lives, making everything possible at unprecedented speed.
Loved by some, vilified by others, this powerful financial tool isn’t disappearing anytime soon. Let’s explore its proper use and function in building wealth.
Credit = Expansion: The Growth Formula
As I briefly mentioned in previous articles about using debt strategically, credit is fundamentally a growth function. Every time a person, company, or country experiences rapid growth, they leverage credit to accelerate the process.
Real-World Example 1: Starting a Side Business
You want to buy a laptop to start writing articles online:
- Target laptop cost: $2,000
- Current savings: $1,000
- Monthly salary: Steady income
- Expected bonus: $500 in two months
The question: Why not purchase now and start generating income immediately?
Real-World Example 2: Scaling a Service Business
Imagine someone skilled in home renovation who decides to start a company. They need:
- A work vehicle
- Office space
- Working capital line of credit
They already have 10 clients ready to start. Again, why not leverage credit to begin?
The Strategic Principle:
Whenever you need to:
- Start something new
- Expand existing operations
- Diversify income streams
You can use OPM (Other People’s Money) as your formula. Obviously, this must be conscious and calculated, but you gain valuable time using this strategy.
Using Bank Money to Invest: A Case Study
It took me years to understand and master this concept, but I recently experienced its power firsthand.
The Situation:
- We had investment capital for a new business
- We lacked working capital to begin operations
- We needed equipment and machinery to start
The Strategy:
- Purchased equipment using my credit card (substantial purchase)
- Divided payment into 5 installments
- Preserved initial capital for cash flow over the coming months
- Launched the business immediately
The Results (4 months later):
- ✅ Final equipment payment due next month
- ✅ 50% of initial capital still in cash flow
- ✅ Business continues growing
- ✅ Equipment will reach breakeven point
- ✅ Bonus: Earned significant credit card rewards/miles
The Safety Net:
If revenue projections had failed, we could have used the initial capital to cover payments while adjusting strategy and building revenue until stabilization.
Key Success Factors:
- Calculated revenue projections over several months
- Hard work to achieve those projections
- Backup capital available if needed
- Experience managing risk and credit
Advantages Yes, Illusion Never
However, I must emphasize: I’m a manager with nearly two decades of market experience. I have:
- Emergency reserves
- Multiple assets
- Extensive financial education
- Years of experience managing risk and credit
This strategy worked for me and my company because I learned to handle risk and credit over many years. This doesn’t guarantee future success, and all precautions must be continuously reviewed.
Critical Reality Check:
Credit cards are excellent tools when used correctly, but everything depends on:
- The scenario in which you apply them
- The timing of business or personal expansion
- Your financial discipline and knowledge
Warning Signs:
- Easy to get entangled with credit cards
- Never use cards as if there’s no tomorrow
- Always maintain close attention to your finances
The Verdict: Hero or Villain?
We determine whether credit cards are heroes or villains through our daily behaviors and decisions.
My Personal Journey:
- Resistant to credit cards for years
- Got my first card only at age 30
- Researched extensively: read books, talked to experts, studied materials
- Life-changing result: My financial evolution accelerated dramatically once I understood credit, risk, and proper usage
My Transformation:
After mastering credit concepts, my life “unlocked” and I experienced much faster financial growth. I will always recommend using credit cards with consciousness.
Strategic Credit Card Benefits
When Used Correctly:
- Accelerated business growth
- Improved cash flow management
- Rewards and miles for travel
- Purchase protection and benefits
- Building credit history
Bonus Perks:
Annual trips with 50% discounts or completely free as rewards for strategic usage don’t hurt at all.
Action Framework: Making Credit Cards Work for You
Before Using Credit for Investment:
- Assess Your Experience Level
- Do you have financial management experience?
- Have you studied credit and risk management?
- Do you have backup funds available?
- Calculate the Opportunity
- Will this generate income greater than interest costs?
- Do you have realistic revenue projections?
- Can you handle payments if projections fail?
- Prepare Safety Measures
- Maintain emergency reserves
- Have backup payment strategies
- Monitor progress closely
The Bottom Line:
With the right objective and in the hands of a focused person, credit cards transform into powerful allies. But remember: the tool is only as good as the person wielding it.
Master credit, and it becomes your financial accelerator. Misuse it, and it becomes your financial destroyer. The choice—and the responsibility—are entirely yours.
Credit cards don’t make people wealthy or poor. People’s decisions do.