I used to think that credit cards are sources of financial disease and will drown you in debt if you are not savvy. That was very true at the beginning when unknowingly I accepted and applied every card the banks offered me.
I only pay the minimum balance each month and paid interest of around 20% and above on average. Worst is that the remaining balance and interest charged of my card that month has also incurred interest on top of it the following month, so on and so forth.
Until it’s no longer bearable to pay even the minimum because the remaining balance has now ballooned to a staggering amount.
This has led to me to become ill and stressed.
I need to do something.
Thankfully it didn’t take me too long to figure out how to be out of the trap I’m in. The key is financial education. I try to read how to benefit using a credit card to my advantage.
It didn’t happen overnight but eventually it becomes an obsession and fast-forward to this date I no longer pay interest on all my credit cards instead I’m making money by using my credit card on a regular basis.
Of course, all of you will ask how?
These are my criteria how and which cards I will choose.
1) Get a card that has no annual fee. There always a few cards on the market that offers no annual fee and with great benefits. I am a fan of anything that is free and why would you not?
2) Apply for a cashback card that pays you money or check by just using your card. Not just a regular cashback card that pays you rebate back to your statement. I redeemed my check once every few months once it reaches a certain amount.
My cashback card Capital One Aspire Aspire Cash World MasterCard ( grandfathered) has excellent benefits. It has medical and travel insurance, trip cancellation and lost or delayed baggage. It also covers car rental insurance, so I don't need to pay extra insurance every time we go on our travels.
Unfortunately this card has now been grandfathered and no longer available to new applicants.
And what would I do with my check? I won’t just run to buy groceries or coffee with it. I will deposit it and transferred it to my investment account to buy dividend paying stocks. (Will have a different topic on this subject soon)
3) A reward card that gives you free groceries by using your card. PC World Elite Mastercard. I use this card where I do my regular groceries, over the counter drugs (OTC) drugs and fills my tank. This card earns and give you more points when use on their affiliated stores, shops and gas stations.
Same thing, the key is to pay the full balance in full each month. I am accumulating my reward points so that I will have free groceries comes Christmas time.
4) Last but not least on your travels abroad. Get a card that has no foreign transaction fee. Home Trust Preferred Visa Card. This is my foreign travel card. It has excellent benefits. No annual fee, pays 1% cashback, Roadside assist, and NO foreign transaction fee.
Most of us love to travel and when we go on a trip, we use our card abroad. Many of us don’t know that there is an extra charge every time we use our card on top of the actual price that we pay using our home issued credit card.
It is called foreign transaction charge and around 2-3% every transaction and won’t notice it as it’s already built in every transaction on our statement. So, right off the bat you are paying more of the item you buy.
It also gets worse, as in addition to the conversion fee, you will also get a poor exchange rate possible. This is due to the service called Dynamic Currency Conversion. This is provided by a separate company that acts as the middleman between the merchant and your credit card provider. They charge around 2-3% of the purchase price to convert it to your home currency.
It is our common knowledge to pay the item we purchased in our home currency as it’s easy to understand how much we spend. But it is a big NO, NO. Example: You are a Canadian traveling to the US and bought something, choose the US currency instead of CAD to your purchase.
So, if you are not using the appropriate card traveling abroad you might end up paying foreign transaction charge of around 3% and DCC of of also 3% so you’re now paying 6% more for the item you purchase.
MY FINAL THOUGHTS
Credit cards are excellent financial tool that you can use to your advantage. It is more secured than debit cards and comes with lots of benefits too.
Just choose the ideal card for different purposes whether it's cashback card, free groceries and travel card.
Most important of all is to pay your credit card balance in full each month.