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Thursday, November 18, 2010

Advantages of Using Credit Cards

Credit cards as we all know is one of the payment method that we can use when we pay for goods and services. The issuer of the card creates a revolving account and grants a line of credit to the consumer (or the user) from which the user can borrow money for payment to a merchant or as a cash advance to the user.

As discussed earlier in Credit Card - Friend or Foe (Part 1) and Credit Card - Friend or Foe (Part 2), credit cards are like fire or water whereby when it is used under our control, it can be friend and if we lose control of it, it will become nightmare which could be fatal. There are many people who lose control of the credit card usage ended up going to the pit of debt and needed a lot of financial assistance from many different sides.

Let us discuss about the advantages of using credit cards. The first advantage of using credit cards is you do not have to bring along a lot of cash when you go shopping or dining outside. This is indeed very apparent advantage that the credit cards have over cash given the high crime rate in some of the places in this country.

One can always argue that we can always use debit card instead, but this is where the second advantage of using credit cards come about. By using debit cards, it means that we are using the money we have in our savings account where as if use credit cards, we will be using money in one month time. This is also the danger of using credit cards if you do not know how to exert proper usage and control.

Spending the money from future is a good way to hedge inflation, but at the same time it will be the first step to step into the pit of debt. A good way to avoid getting deeper into the pit of debt is to have the cash to pay the balance of the credit card in full and not the minimum payment that is stated in the statement. Once you start paying only the minimum payment, this is where the debt will go uncontrollable. The way I use to ensure that I have sufficient money to pay the credit card is keeping track on the amount whenever I swipe this plastic - even coming down to every penny that I swipe. I mean if you swipe 23.20 now and you consider the transaction as 23, imagine every 10 times of the same amount swiped will lead to additional 2 - not much but when it snowballs, I cannot really imagine how much the amount will totaled up to, could be huge.

Anyway, let's go back to the advantages of using credit cards. The next advantage of using credit cards is the loyalty reward points and the cash rebates. Some credit cards not only offer loyalty reward points or cash rebates, but free gifts if swiped during promotional period. In fact, I got my free Ipod Shuffle by using credit cards as well.

Think I gotta sign off for now and discussed about the advantages of using credit cards in some other time. Watching Jackie Chan's Wheels on Meals.

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