You’ve probably heard how dangerous credit cards can be. They can create a spiral of debt and even more debt when you try to use another credit card to handle the rest of the debt. A credit card is, unfortunately, easily abused and it’s so easy to get enticed by all the spending you could probably do.
Despite all that, it’s still a tool that can be used to your advantage. It has some versatility that straight up cash does not, and it can be used in ways that can actually benefit your overall financial health. If that’s gotten you curious, here’s how you can use a credit card to your advantage.
Think about control
It’s probably the hardest thing to do when you’ve got a credit card at your disposal. Controlling the way you spend and the way you use your credit card is a key factor in keeping it as a tool to use towards your financial advantage.
Paying your balance on time, not going into debt by overlapping your credit limit, and constantly zeroing out your monthly dues is a great way to build your credit rating with your credit provider. Now that a credit rating system is being made available in the country, a good credit score can only increase your chances for higher rewards, and a better chance of being approved for a loan once you need it.
Think of it for emergency uses
While it’s more ideal to actually have an emergency fund, a credit card can work as your backup emergency fund if the need is just that great. It should be noted that your credit card should have about the same credit limit as your actual emergency fund.
It’s handiest in situations where cash is needed immediately, such as tuition fee payments or if someone needs to be admitted to the hospital and you can’t get to the actual cash in time. The trick is to be able to pay off the amount as soon as it’s been spent.
Think of the perks
It’s no secret by now that most providers have a ton of promotions, discounts, and rewards that are provided to their subscribers who’ve got good credit standing.
Some give freebies for restaurants, others might give out reward points that can be accumulated and used to purchase airline tickets, or exchanged for other goods. There are even credit cards out there that cater to specific services, like one for fuel and car insurance, or one that’s specific for online purchases.
These points are usually accumulated by everyday purchases, including groceries.
Think of the discounts
Just as the perks of credit cards reward you with goodies, freebies, and other items, co-branded credit cards also dole out regular discounts at restaurants, or at boutiques when you shop. These discounts can help save a little more cash when you dine or shop.
Some cards also offer rebates on your spending, which basically gives you back a portion of the money already spent on purchases.
Think of the business opportunities
If there’s one thing that can sometimes be an issue, it’s getting the perfect piece to complete your outfit. You could, hypothetically, start an online clothing store for clothes that don’t normally make it to local shelves.
Because credit cards open up your ability to buy for people who can’t order for themselves. You could turn a small profit, and provide supply to all kinds of demand for fashion.
At the end of any day, the credit card is the tool to be used, not you. Keep your goals in mind even as you attempt to use your credit card to your advantage. It’s also ideal to have no more than two credit cards, that way; you can track your monthly dues easier.
Make it a habit to pay your dues in full and on time, and you’ll be well on your way to balance between credit card use, and not having any debt.
Kyle Kam is from MoneyMax.ph, a financial comparison website aiming to help Filipinos save money through diligent comparisons of financial products.