What do credit cards and chainsaws have in common? Both are helpful and handy, but they can cause massive damage as well. When credit cards are used wrongly, these can cause terrible financial stress. No feature in any credit card can help you if you spend beyond your means.
Data from the Bangko Sentral ng Pilipinas (BSP) show that there is now a P157 billion ($3.4 billion) credit card debt, with almost 10% of that classified as non-performing. With this kind of statistics, is it no wonder that this plastic money has been at the wrong end of criticism.
The truth of the matter is, credit cards are more of a boon than a bane. Used wisely, they could help boost our personal finances — and provide us with a bit of luxury.
Here are 4 advantages I personally experienced while using credit cards:
With robbers and pick-pockets ubiquitous in Metro Manila, it has never been advisable to bring a big load of cash. Credit cards provide us with that convenience. And if you have shopped during a mall-wide sale, you know that queuing to withdraw money is time-consuming (you might miss the best bargains). Credit cards allow us to make our purchases even without cash on hand.
Even when the misfortune of having credit card lost or stolen hits, they can easily be replaced (at least in my experience).This is unlike cash which you lose permanently. Furthermore, big purchases can be broken down into affordable and budget-friendly installments. I have used this feature in the past, and frankly, it is very convenient.
For those who frequently check promo airfares, having a credit card also allows you to purchase the best possible flights.
2. Emergencies and unexpected expenses
One distinct advantage of having a credit card is its usefulness in times of emergencies. Once, I had to rush my secretary to the hospital because she was having symptoms of a heart attack. Fortunately, it was only GERD. But the series of tests done on her, as well as the use of the emergency room and its facility, amounted to P7,000 ($155). I only had P2,000 ($44) cash at that time, and so I had to use my credit card in settling the bill.
Another time, I had emergency car repairs, but since I had earmarked my cash for other expenses, I had to resort to my credit card to pay the repair bills. I just withdrew from my other accounts when the statement arrived.
Credit cards can also provide cash advances through ATMs. In the event there is a need to use cash, and you don’t have enough funds, then the credit card can be your lifeline for the moment.
3. Rewards and promos
A couple of years ago, I was fortunate to have exchanged my credit card points for P4,000 ($88) SM gift certificates (GCs). I was awarded with more shopping opportunities just by using my card over and over again! This is another unique advantage of credit cards. Points accumulated can be exchanged for gadgets, travels, and like in my case, GCs.
In some other cards, points are converted to frequent flier miles. Accumulate enough miles, and a cardholder can exchange this for airfare. There was also this bank that offered free round-trip airfare to United States and Europe for a certain amount of credit card transactions (the feature was patronized so much that it prompted the bank to immediate cease it).
Cardholders are also able to earn discounts through co-branding. Most major credit cards have partnered with gasoline stations, thereby allowing cardholders to earn rebates from gas fill-ups. Since competition is stiff, card companies have exclusive partnerships with merchants allowing their respective cardholders to receive discounts and freebies. The freebies I have enjoyed in the past include coffee, food, shoes, and even movie passes.
4. Record keeping
One underrated feature of credit card is its ability to record all transactions. Often wonder where you money went? Well, try using cards next time instead. That’s why I use cards in most of the establishment that accept credit cards. It helps me keep track on how much I am spending and in what particular expenses I have been spending too much on.
I have also utilized a card just for representation expenses. This way, I can monitor how much income I earned from each particular meeting.
Other credit cards allow downloadable .csv file of your transactions. Input this in money management software like Quicken and Pocketsmith and you can view a graphical illustration of your expenses.
Before you dismiss a credit card agent offering you one, take some time to consider it. Think of how much you can earn and save by having and using one. You’ll even get a nice umbrella to go with it.