All Woman

Make your credit card work for you

BY ANNEKA BYNES-THOMPSON
Wealth Associate

Wednesday, April 24, 2019

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CREDIT cards are not your enemy. It is popular belief that credit cards are the main causes of debt and financial distress among consumers. Many individuals fall into this category due to mismanagement and lack of knowledge about the product itself. This perception is further fuelled by the belief that the bank is the only party that benefits from this agreement through the collection of multiple fees and interest charges. This article will help to bust some of the myths and help you to understand how you can make your credit card work for you.

Almost everyday we spend on items such as groceries, gas, online shopping, utility bills and personal services. What are you gaining from spending your cash on these purchases? Why not earn while you spend? Consumers have the ability to use their cards to their benefit by earning in numerous ways. Let us discuss how.

Billing cycle

Every credit card has a billing cycle within which the customer conducts purchases and makes payments. A billing cycle can range from 25 days to 31 days depending on your card. Consumers can enjoy interest free periods of up to 55 days once the purchase is made on the first day of your new billing cycle. For example, if a statement is prepared on the fifth of each month and the consumer makes a purchase on the sixth, that transaction does not become due for payment until 55 days later as this would be printed on the next month's statement. Additionally, interest can be avoided completely by clearing the entire outstanding balances on or before the due date.

Fees

The main fees credit card users fear are late fees, over-limit fees, annual fees and cash advance fees. However, three out of these four fees can be avoided. Late fees are only charged if the customer makes no payment or a payment that is less than the minimum amount printed on the statement. The minimum payment is usually a small percentage of the overall outstanding balance, normally five per cent or below. Over-limit fees are only charged if the user exceeds the assigned limit on the card. The cardholder must always be cognisant of the position his/her card is in to avoid this fee. Some credit cards offer the customer the benefit and convenience of taking cash. This attracts a cash advance fee and interest which is separate from regular purchases. To avoid this fee it is recommended that the cardholder find a way to swipe the card rather than pull the cash from the machine. If the cash advance feature is to be used, it should be under extenuating circumstances. Most credit cards attract an annual fee; however, some credit cards have a cash back feature that can absorb your annual fee. The cardholder receives cash rebates, which is a percentage of the amount spent for a specific period, and this amount is posted as a credit to the user's card. Card users can explore the option of choosing a card with a low annual fee to suit their budget. It is always best to carefully select the right credit card for you and avoid having multiple cards.

Rewards

Allow your credit card to give you attractive rewards such as travel benefits, hotel stays, priority passes, cash back and car rental coverage, just to name a few. Some credit cards give you the ability to earn travel points towards airfare, which can result in the cardholder paying little or nothing for a plane ticket. You can also enhance your travel experience with a priority access pass that is linked to some credit cards. This gives you entry to prestigious airport lounges while you travel in style.

Using a credit card is one of the safest ways to transact business. People no longer have to worry about walking around with large amounts of cash, and the card offers the convenience of conducting purchases at merchants online and in stores, giving the cardholder a record trail of their spending. Cards can be easily deactivated if lost or stolen and if unauthorised purchases or transactions are made, the customer is protected by the bank against any losses. There is also credit card insurance that serves as a safety net that covers loss of life and loss of job, example, redundancy.

Make your credit card work for you and spend wisely while you earn. Finding the right card to suit your needs can make spending worthwhile.


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