When used properly, credit cards can save you time and money, while providing attractive rewards that increase with your spending. And making required payments can improve your credit rating.
For people who grew up in a “save first” culture, or for those that have experienced challenges with using too much credit in the past, credit cards can sometimes carry negative connotations.
However in today’s financial world, a credit card is just another method to quickly and easily pay for goods and services. Whether you’re using it for retail purchases, using your smartphone’s mobile wallet, or entering it online (on a secure site, of course) paying with credit cards has become more convenient than ever. And when used properly, it can actually make financial sense to use them.
Credit cards can help you establish or maintain a solid credit rating as long as you make the required payments on time and stay within your approved credit limit. Why is this important?
For younger people who are trying to build a good credit history, this can result in getting that first car loan or first mortgage without a co-signor. It can also be important for anyone borrowing money in general, as a higher credit score can quite often mean easier access to future credit which sometimes can lead to a more attractive interest rate, saving you both time and money.
Cashing in on Rewards
Most credit cards today carry some sort of rewards program. This isn’t the case with using cash. Very few debit reward programs are available, and even if they are, they do not compare to the value of most credit card reward programs.
For example, with Assiniboine’s CHOICE REWARDS cards, every time you make a purchase you can accrue points toward gift cards, merchandise, unrestricted travel—or turn your points into cash.
Calculating Cash Back Rewards
Cash rewards can range from 0.5 to 2 per cent cash back on your purchase, depending on your card. If you consider your annual household expenses, you can take advantage of using your credit card to gain rewards instead of using cash, debit or pre-authorized payments from your bank account, which do not typically offer substantial reward programs. Although not all companies allow pre-authorized payments by credit card, there are some that do.
*2% Cash back based on the current CHOICE REWARDS Platinum or World Elite product. Other cards have varying levels of rewards values.
In the example shown here, this person has earned $348 cash in one year just by using their credit to pay for their household expenses. Credit cards also typically offer an interest-free or “grace” period between the statement date and the payment due date, allowing you to keep your cash in your possession longer.
Budgeting for Payments
If you are someone who feels it may be difficult to budget with one monthly payment, you may consider making more frequent payments, such as weekly or bi-weekly, to coincide with your pay periods. You may even choose to set regular payment amounts to come out of your account automatically, leaving nothing or just a small balance due by the time your statement is generated.
Avoiding Interest Charges
Remember that the full balance of your credit card has to be paid by the due date in order to avoid interest charges. Anything less than the full balance will result in interest on your purchases being charged back to the date of the actual purchase, typically at high interest rates. If you need credit to assist with cash flow and to carry you through a certain period of time, look into alternatives such as a loan or line of credit as these may be a better option for your financial plan.
Considering Other Credit Card Benefits
Credit cards can also provide additional advantages, and these may or may not come with an annual fee on the card. Each credit card has its own terms and conditions, and you should always refer to your specific card holder details. Here are a few general examples of other benefits.
- Global access to emergency cash when travelling.
- Free Purchase Protection
- Extension of the manufacturer’s warranty for up to 2 more years on items you purchase on the card (for example electronics, appliances, etc).
- Items purchased on the card may be covered for up to 90 days for accidental damage or theft.
- Free rental car collision damage coverage — avoid paying extra fees at the car agencies.
- Free travel insurance — including Health Insurance, Baggage Delay and Trip Interruption Insurance.
- Price Protection — if you find a lower price on an item you purchased with the card within a pre-determined period, you may be eligible for a refund of the difference from the credit card company.
As you can see, credit cards are not just about providing a short term credit facility when cash flow is tight. When used properly, credit cards can save you time and money, while providing attractive rewards that increase with your spending.