The benefits of having credit cards

The Banko Sentral ng Pilipinas (BSP) reported through its media release that credit card receivables stand P130.7 billion in the first quarter of 2010. That is how much card holders have accumulated in debt. The figure is quite staggering and often, these innocent-looking, credit cards are always the culprit and take the blame for their irresponsible owners.

Why is it that there has been a stigma for credit cards? They are branded as evil and what do the financial gurus tell you to do when you want to be debt free? Yes, cut your credit cards. But cutting them is only a temporary solution to the long-term problem. They should be not be feared. As a matter of fact, credit card can present a lot of benefits when you wisely.

Convenience. Credit card lets you bring less cash and the less cash you carry around, the better it is. Hey, you don’t want to let the whole world know how much you have, do you? Additionally, utility bills and insurance premiums can be automatically debited from the credit card. This saves you the hassle of forgetting their due dates. Then you won’t have your electricity cut-off or your insurance policy lapse. If your credit cards do get stolen, you can easily call the customer service and report the matter. That way, the thief won’t be able to enrich himself at your expense.
Additional resources. In case of emergency and only during emergencies (a sale is not an emergency) credit cards allow cash advances for the cardholders. This is very useful in case you don’t have sufficient funds in your savings account through your Automated Teller Machine (ATM) or your wallet. One caveat though, there is a six percent cash advance fee that the companies impose on the card holders so use it only when it is necessary.
Perks and privileges. Credit Card companies like Citibank and Hong Kong Shanghai Bank Corporation (HSBC) offer cardholders lots of perks and privileges. You get freebies or discounts from their partner establishments every time you use their affiliated credit card in your purchases. There are also co-branded products which allow card holders to consistently get rebates. An example of this is the Shell-Citibank credit card that gives a 3% rebate for every fill-up. Platinum and gold card holders also additional exclusive benefits like personalized shopping and access to VIP lounges in airports just to name a few.
Rewards. On top of the perks and privileges, credit card companies even offers rewards for the cardholders and these are in points and can be use to exchange for items in their catalogs from gadgets to furniture to airline tickets. Other credit cards offer rebates that can be credited to the outstanding balance. Citibank, in partnership with cinemas, offer free movie passes for every single transaction of P1,500. It is an innovative reward given that there is still a lot of people who want to watch movies in theatres but don’t because of the expensive ticket prices. A 100-peso discount is a great incentive to encourage the public to patronize the industry.
Installment availability. Buying a high-ticket item is now made easier thanks to the installment feature of credit cards. These deferred payments are usually offered with “no interest” in the first six months and charge you a minimal interest rate thereafter. Of course, it is due diligence to research the original price of the item you wish to purchase before buying it. That way you are really taking advantage of this feature.
Leveraging. Credit card companies offer call for cash for good payor at a very minimal interest. If you could invest the amount at a rate higher than what the companies charge you, then you’d be taking advantage of the amount loaned to you. It is also a good way of forced-saving because you’d be forced to pay for the installment amount every month.
Establishing (good) credit history. Using credit cards is one way of establishing a good credit history. That is, if you do pay off all your obligations on or before the due date. By having a good credit history, bank are more than willing to lend you money at lower interest rate and more flexible terms.

With the passing of the Credit Information Act in 2008, banks and lending firms can easily access your credit history and determine if you are worthy of a loan or not. Often neglecting to pay your dues on time or worse, defaulting on them won’t look on your credit standing. Don’t expect to get the best deals out of the loan you’re applying.

Being a disciplined card holder can be very rewarding. Not only are you benefiting from the features by the credit cards, you are learning to handle your finances carefully. The key here is discipline: discipline to pay the dues on time, discipline to pay more than the minimum or better yet, the full amount, and discipline not to go into impulsive buying. A credit card is not an extension of your wealth and by no means is it your wealth either. But by having a credit card, you learn to neither juggle your finances in such a way that you buy the things you want without being burdened by them nor feel any guilt in buying them.

In the end, credit card usage depends on your buying behavior. So the next time you see an unwanted amount surprising you, please, don't blame it on the poor credit card and cut it in two. There is more to it than meets the eye.

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