When it comes to credit cards, financial experts are in opposite ends of the spectrum: some of them encourage you to use your cards wisely so you can take advantage of it, while others strictly advise against its use so you won’t be tempted and drown in debt.
In my case, when I was starting out, I was against the use of credit cards, too. You see, credit card is not free money – it’s actually the money of the bank, and when you use it, you’re essentially taking out a short-term “loan” that you promise to pay back, right?
But be warned: majority of credit cards have interest rates of 3%/month which translates to 36%/year. This is not the maximum, though. Some cards even go higher than this!
If you can’t pay the full amount every month on time, then don’t get one.
But, if you can, then read on:
1. If possible, wait for a winning sign-up bonus before you apply.
When I first realized that I needed a credit card, I didn’t apply immediately. Instead, I diligently identified the credit card reward I wanted and the credit card issuer I trusted.
After waiting for three weeks, the credit card issuer I trusted held a promo that gives you a huge signing up bonus for the credit card reward I yearned for. As such, I got the card-related reward (airline miles), the signing-up bonus (5,000 miles which is worth P225,000!*) and the convenience of a credit card as well.
For example, if you want a credit card with travel miles, consider the airline that you know you’ll frequently transact with. Then, check out their website if they have a partner credit card. After pinpointing the partner credit card, call them and ask if they have upcoming deals you can take advantage of. * 1 mile = P45
2. Use your card to stretch your cash flow for necessary big-ticket items.
If you’re a freelancer who depends on his laptop for his work and income, buying a P25,000-laptop seems too heavy on the pocket, especially if you’ll be paying for it in cash. Instead of experiencing a significant hit to your cash flow in one day, why don’t you buy your device on installment basis at real 0% interest?
Just be sure that you will still pay the full balance of your credit card in full and on time – all the time.
3. Maximize your card’s billing cycle.
You can charge something on your card, make money off of it and then pay for it after 40 days, or more. For you to take advantage of this, memorize your card’s statement date and payment date.
Card’s Cut-Off/Statement Date: 7th of the month
Card’s Payment Due Date: 20th of the month
If the date today is October 15, 2014. Let’s say you want to buy a dress and re-sell it.
If you buy a dress for P500 and charge it on your card, your card’s cut off date will be on November 07.
The deadline for payment will be on November 20 – more than a month from now.
Before November 20, sell that dress for a price higher than when you bought it.
Then, pay your balance in full and on time. This way, you extended your payment due date and you managed to profit at the same time.
Remember, these tips are designed to help you maximize your credit card’s regular use. If you:
– spend extra money just to earn an extra reward;
– constantly charge frivolous big-ticket items to your card just because you can;
– charge an item on your card even though you have no idea where you’ll get the money to pay for it; then stop.
As with all things, balance in personal finance should let you enjoy today and tomorrow.
Lianne Martha Maiquez Laroya is a licensed financial adviser who founded The Wise Living and Young Pinoy Millionaire. Get your FREE copy of her ebook, “Credit Card Debt-Free For Life: 5 Effective Steps on How to Get Out of Credit Card Debt in Just 5 Weeks” now. It’s free from October 16-19, 2014 only!
My 2nd book Stock Smarts: Winning Strategies is now out! Click the Link to Register and Order.
If you’d like to learn more how to invest in the stock market and learn how to make your money work hard for you. I’d like to invite you to our upcoming events:
- November 27th Modern Technical Analysis: Chart Patterns and Oscillators
- November 28th Stock Smarts Davao – Basics, Fundamentals, and Technicals
- December 5th Stock Smarts Singapore 2014 (Basic) – Day 1
- December 6th Stock Smarts Singapore 2014 (Technical Analysis) – Day 2
- December 13th Market Outlook and the Top 10 Stocks for 2015!
For inquiries, registration, and payments email: firstname.lastname@example.org
Thank you Victory Greenhills for having me! Thanks to everyone who attended the seminar!
*pictures via google search