1. Don’t overspend
Credit card is an alternative means of payment which makes payment very convenient, especially online payment. With a credit card, you can slim your bulky wallet . Indeed, most of the time, what you need is merely a cardholder. That being said, the temptation to pay instantly with credit cards can be very hard to resist. There exists a much higher risk of overspending than the era before its invention. There are two major reasons. Very often, monthly credit card limits are set higher than your monthly income and we usually possess more than one credit card. Also, since actual cash outflow is deferred, it's easy to forget that you are still spending money. If you do not keep track of your spending regularly, it is not uncommon for cardholders to discover at the end of the day that they are spending a lot more than what they can afford.
Overspending can be detrimental to your finance management. If you are unable to repay your credit card debts on time, you run the risk of having to pay a very high interest rate computed daily on a compounding basis. This will also lower your credit score which in turn affects your ability to borrow bank loan at a low interest rate in the future, amongst other things.
Prevention is better than cure. Set a budget and plan your spending now. Start with your monthly income, subtract necessary expenses such as rent, food or transport to find your usable income before you give allowance for other expenses. Set a goal, track your spending and adjust your budget. Let's see how much you can save each month. Don’t wait until it is too late!
2. Automate payment
Different credit cards have their own statement date and due date. Unless you pay off your debts immediately once you receive your statement, you will have to remember so many different due dates. Although you can easily mark them on your calendar and even call your bank to change all due dates to the same one, a more convenient alternative is to automate your payment. By doing so, you don’t even have to pay off your debts manually every month.
But do remember to make sure that your saving account has sufficient funds at all times. And always keep track of your credit card statement regularly to avoid late payments.
As a side point, if you desire greater convenience in making other type payments as well, such as rent or salaries, automate bill payment is also available on Reap even if the recipients do not take credit cards.
3. Select the best credit cards for you
There are so many different credit cards out there, do you know which suits you the most? How can you get the most out of your credit cards?
Indeed, it depends a lot on your expenditure patterns. If you enjoy online shopping, you may want to go for credit cards that provide extra rewards for online transactions. If you like travelling, you may prefer cards that have attractive plan for miles or extra cashback for foreign transactions. You may also want to consider cards that provide huge discounts to your favourite restaurants or stores. Affinity cards may be a wise choice. In choosing a credit card, you can conveniently refer to online comparison platforms such as gobear which provides the latest information on credit cards offers.
But before that, there is one essential thing that you must first do: identify and understand your expenditure patterns. And this is not static. It gradually changes alongside your changing lifestyle and preferences. Wish to have a better idea of how you spend your money across lifespan? Personal finance management platform such as Gini may be of assistance to you.
4. When you can use credit card, don’t use cash
Unlike countries such as South Korea, Canada or Norway where credit card dominates, in Hong Kong, cash is still the mainstream. Recent development of mobile payment helps to promote credit card usage as its complement. However, due to transaction costs and other reasons, not all businesses are willing to set up a credit card system. Fortunately, business practice is evolving as more suppliers realize the convenience and benefits that credit card system could bring to them.
But sometimes, we as the payee ourselves, tend to forget that we can indeed pay with credit cards since the default in this society has long been cash. The younger generation may not find it difficult to build such awareness but what about your parents and your grandparents? Spend a few seconds to check if that shop accepts credit cards before you pay. Simply by that, you can gain rewards and miles following a more frequent usage of credit cards.
What’s more? Even if unfortunately the recipient does not take credit cards, there is still a way out with Reap.