How Credit Card can be a useful financial tool?
CREDIT CARD – these two words generally invoke negative connotation of bad financial habits and there are a whole lot of articles and information on why should you not have a credit card. But credit card can be a very useful financial tool, if used correctly (dues paid in full every month).
For one they provide you an opportunity to earn interest on money that you don’t have. How? It’s simple and smart way of thinking – when you need to spend a certain amount, instead of paying cash or using your debit card, if you make the payment using your credit card you start earning interest on that money {since this money is still in your bank account instead of at the retailer’s} for nearly one whole month until your credit card payment due date has arrived. Isn’t that genius? Of course you need to be sure that you are spending only the amount that you actually have in your bank, and not more otherwise the credit card can be a devil in disguise.
Additionally, many credit cards comes with a lot of benefits like free insurance cover, reward points, cash back, free gifts when you spend a certain amount and more. These benefits would not have been possible if you used cash for payment.
Here are a few tips on selecting your credit card:
1. You must absolutely not use your credit card for borrowing, it should only be used for the benefits it offers over cash payments. However, you must still choose a card that charges the least interest rate.
2. Make sure your card does not charge any annual or renewal charges, unless the benefits from the card outweighs the charges {like free air tickets whose worth will be more than the annual charge}.
3. Do your research and choose the card that offers rewards or benefits that suits your lifestyle. If you are a frequent traveller then a card that offers extra benefits to use the card for your travel bookings, upgrade, reward points that can be used as miles, lounge access, etc. would make sense. If you are a compulsive shopper then a card that offers reward points to use it at your favourite stores along with discounts for just using the card at certain stores will make sense.
4. Excellent customer service is a must, you should never settle for less. There are domestic and international credit card companies that offer world-class services. Make sure you choose the best. Online access to your card details, making payments online, a 24/7 customer service access, polite staff, prompt response to queries are a few services that are a must. And if you are higher up in the card bracket like Platinum cardholder then you can expect a lot more {concierge services}
5. Transparency in bill and charges. This is very important as you must know for what and why are you paying the amount for. No hidden charges, absolutely everything should be in black and white.
Credit cards are definitely a great financial tool but it is imperative that you use it responsibly and do not consider it as a medium to borrow money for your expenses.