First you need to understand how CC (credit card) works (not all countries). Don’t forget to read the last paragraph!
Your usage of 1st – 30th each month, need to be paid by 20th the following month (due date). If you pay full on the 19th, you won’t be charged interest. So, if you purchase something on the 1st, and pay full on the 20th next month, you get 50 days of interest-free period!
If you didn’t pay in full, you just need to pay 5% from your outstanding balance. You will be charged around 1.5% interest.
So, what’s the best way to use your credit card?
- You need to “time” your spending. You can have an interest-free “loan” for nearly 2 months! Don’t make the bank richer. Save your interest expense.
- You must pay in full, or else it will hurt you as the balance will snowball and become bigger. Ask anyone, they’ll tell you to full settle every month. I agree, but don’t forget to time your payment.
- You can use your credit card for business if you have a hot product. Remember back point #1. You’ll have interest-free period. It’s easy to get a CC vs Business loan. So, what I did was, I purchased my stocks using CC and make sure I sell everything before the due date. This is good for those who want to do business but lack in capital. However, please use it with caution.
- Another trick? Have you heard of “0% installment”? You swipe $6,000 and pay it over 6, 12, 24 or 36 months! Some you may have to pay a little fee, some don’t. This can give you extra time in clearing your balance. I used this to buy my laptop which costs $1,000+. I paid for it over 6 months without any additional fees. But remember, the bank will “block” your limit. If your limit is $2,000, you’ll left with $1,000 only to spend.
- Balance transfer, anyone? This is great if you want to save on your interest. Let’s say now you’re charged with 18 interest, you can do a balance transfer and only pay 6% per annum! How does this work? Bank A buy your “balance” e.g. $3,000. They’ll pay in full. But now you have to pay Bank A 6% per annum. The best part is they will re-structure your balance so that you just pay a fixed amount monthly.
- You should buy high value item using credit card as most of them offer you installments. Let’s say you can use your smartphone to make money. You swipe your card $600 and pay 6 months installment ($100). Within the 6 months, the money you made might have surpassed the $600. So, after 6 months, you have a phone and “money making machine”. Thats way better than saving $100 for 6 months and buy them 6 months later. You’ll only have a phone, and have to start saving all over again.
- One of the best thing when you’re using CC vs Cash is that you’ll get an exclusive offer and discounts. You can earn points which can be exchanged with cool stuffs. Also, it’s safer than bringing cash around. Even if it’s stolen, that guy won’t know what’s your PIN number. Oh yeah, you need them to do online bookings & shoppings too right? And never forget about the airport lounge. You won’t get that if you use cash.
- Use Cashback website. Users of cashback websites can know ahead of time how much they stand to get back for their purchases at each specific retailer before they buy. When a customer makes a purchase online, instead of visiting the retailer directly, they may choose to follow a link from a cashback website to generate a monetary reward when buying products or services. The cashback website receives a commission from the retailer that, after the purchase is confirmed, is shared with the customer who made the purchase. Thus using this service you will return some money from purchases.
All right, here’s the last para that I want you to digest. What I’m suggesting is that you BUY TIME. That’s the reason why we delay our payment. But don’t forget we still “play” by the rules. This is time value of money ($1 now worth more than $1 in the future). To put it simply, if you have $1,000 and want to buy a $1,000 item, swipe your card and get into an installment plan of $83 for 12 months. You should use the $1,000 to make more money for you. Pay yourself first, pay the rest last. BUT DON’T FORGET TO PLAY BY THE RULES and always know your numbers.
Thank you and hope this can make all of us a better CC user.