Tuesday, August 6, 2019

Leveraging Your Credit Cards


I first saw a credit card in action when my US-based cousins came back for a vacation and they would give the waiter a plastic card to pay for our meals or would hand the card to the cashier, who would then swipe it before handing my cousin his/her purchase.

It was pure magic and I wanted to be doused in its pixie dust.

Not long after, my dad received a credit card and I finagled a supplementary card for myself. There was no stopping me now and I quickly made regular stops at the mall.

The statement of account arrived and I paid the minimum, because isn't that what you're supposed to do? But then the second statement of account arrived a month after and I saw that the finance charge and penalties were more than the minimum I paid, so my outstanding balance from last month barely moved an inch.

After that jarring realization, I always paid off the monthly charges in full or at least tried to pay it off in 2-3 months.

While I'd like to say that I wisened up after that experience, the sad reality is that I continued to indulge in useless purchases and was enabled by my credit card. But at least I paid it off in full, or at least tried to, every single time, so I believed that I was OK.

Fast forward to the time I finally faced the mess that was my personal finance life and reassessed the role of credit cards in my life, eventually making them work for me and not the other way around.

I still have credit cards because I'm a firm believer in the conveniences they offer and also because I have developed a lovely lopsided relationship with my credit card where I do most of the taking.

I use my credit cards for our common household expenses like groceries and gas, so I don't have to worry about having cash on me all the time. My credit cards thus provide a credit line with 0% interest and fees, just as long as I settle my bill in full when it falls due.

Another advantage I did not anticipate when I first started using a credit card, was how it could provide me with a quick loan if needed. But take note that I'm not talking about those special PINs you can use to draw money from your credit card, steer clear of those because the charges are ridiculous! Instead, I'm referring to the personal loans that credit card companies offer to select clients.

I would often receive calls from my credit card provider informing me of its special personal loans with limited monthly add-on rate of only 0.45%, or something like that. I remembered inquiring about the effective interest rate per year and it was only between 9% to 10%, way better than the usual bank rates of 12% -15% p.a. or loans through your (not-so) friendly neighborhood lenders which can go as high as 40% p.a. I have resorted to those credit card loans to bridge the gap in our budget and even when I don't need money, I take comfort that I have a credit line at my disposal in case I need quick cash and my savings are not enough.

My favorite credit card benefit to date though is the automatic bills payment feature. I enrolled some of my utilities with my credit card, so now Meralco and PLDT bills get paid right away and those are two less things I have to deal with on a monthly basis.

My credit card provider (RCBC) also has bills payment on demand, meaning you call it to pay your bills, which I personally think is silly because it defeats the whole purpose of automatic payment. But apparently it's the merchant's choice whether to participate in the Autocharge or On Demand program so I'm just waiting for my other merchants to wisen up and join the Autocharge wagon (get on it Globe!).

Ultimately, having a credit card brings with it so many advantages but only if you play it smart by always paying your bill in full and using loans in your favor by taking out a loan to fund a money making endeavor and not to pay for a vacation.

If you're ready to play it smart and use a credit card to your advantage, you can mosey over to iMoney's credit card comparison page and choose which credit card will best work for your lifestyle. iMoney has a cool feature where you click the icon of what you usually charge, or will be charging on your credit card, and then the credit card recommendations change to suit your needs.



Finally, remember that it's not the credit card that gets you mired in debt, rather, it was the impulsive and reckless person holding the card that caused it. So master your emotions and you'll find yourself enjoying a healthy relationship with your credit card. #hugot

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