One of the tips we see often when we seek frugal lifestyle advice is “Ditch your credit cards.”
While credit cards have a bad rap as they are one of the biggest temptations that push us to the sea of debts, we tend to overlook the positive sides.
The Rules of Using Credit Cards
Below are some basic – essential rules you have to remember before using a credit card if you want to avoid debts from the credit cards:
1. Always use a credit card that has an interest free period, at least 40 days.
This is essential to avoid paying any interests when you pay the balance owing on the due date.
2. Always choose a credit card that has no monthly/annual or any account keeping fees. Many companies offer $0 account fees. Unless the rewards and cashback are higher than the fees, always go for $0 account fee credit cards.
3. Always pay the total balance owed, not the minimum balance, on or before the due date. And therefore, do not purchase anything that you can’t afford.
4. Never use your credit cards to withdraw any cash unless it’s clearly stated in their terms and conditions that cash is included in the interest-free period
5 . Always know why you use a credit card as a method of payment. You should always know why you use a credit card as a method of payment, which will be discussed below.
Without following the rules above, you’re likely to get trapped in unwanted, high-interest debts.
The Benefits of Using Credit Cards
When you can confidently follow the rules, you can take advantage of the credit card benefits. Here are five benefits of using credit cards:
1. Practicality
When you use just one credit card to pay for everything, you’ll get one neat statement that details all your expenses. This saves a lot of time when you want to review your budget.
2. Travel Advantage
When you travel overseas, credit cards are the easiest and most acceptable method of payment internationally. They also have fraud protection so you can quickly block your credit card when it’s lost or stolen.
3. Rewards and Discounts
Many credit cards collaborate with many companies, offering points as their loyalty program. This means, for certain transactions at certain stores, you get some points. Over time, you can exchange these accumulated points for money or other things for free as a reward. Some stores offer discounts when you pay with certain credit cards.
4. Instant Loan
This is particularly useful if there’s an unexpected expense that needs a payment upfront, such as car insurance excess fee, medical emergencies, etc.
5. Help with Credit Rating Score
A credit rating score is the likelihood of a borrower to pay back their debts. When you don’t have any other loans and you always pay your credit card full closing balance on time, your credit rating score is high. When it’s high, it’s easier for you to borrow money compared to those whose credit rating score is low.
