6 Ways To Use Credit Cards More Effectively Without Leakage
It won’t surprise me one bit if my wife make a public announcement that the love of her life after the kids are the supplementary credit cards I gave her. Women just naturally seem to have a very close relationship with credit cards.
But when these things get into the wrong hands, they can cause great financial hardship to both the card users and their families. The worst part is the people who get into mountains of credit card debt actually voluntarily signed up for them in the first place.
As banks and lenders are understandably profit-driven, you can expect them to attempt to reap maximum returns on their products while keep costs low.
So what can you do to avoid getting suckered into cards that burn up your money with fireworks?
1) Read the fine print
It seems like everyone including our grandparents will at least give this 1 advice whenever we tell them about a new financial product we sign up for. What an irony that we don’t listen to them often enough.
When was the last time you read every word of the terms and conditions booklet that come with every credit facility? I rest my case.
Always read whatever you are signing up for. This includes the application forms, facility letters, and mail packages sent to you.
It is the responsibility of the banker to explain the details of your account in a manner that you will understand. If you are unclear about any terms, don’t be afraid to call up their hotlines to probe.
2) Go through your monthly statements
These days, more and more card issuers are going the paperless route for account statements. It makes perfect sense. Consumers are getting more digitally-savvy, more trees can be saved from less paper, and banks cut their costs. But don’t sacrifice the forest to save a tree.
Most people still prefer to receive hardcopy statements. They are much more easier to review for cash leakage and also gives you the convenience of easy filing. It’s not your job to help the card issuer to save on their printing costs if you prefer to review your transactions for a hardcopy statement.
Keep an eye out for transactions you do not recognize, due dates, minimum payments, currency conversions from travel expenses, etc.
Fraudulent unauthorized transactions occur more often than most people think. Especially when you are an avid traveler. A key reason scammers like to target tourist is the very reason that they expect a certain number of travelers to not check their statements meticulously.
3) Don’t be afraid to challenge transactions
Most people avoid the trouble of calling up customer service hotlines because they feel that a small charge is insignificant and that a suspect transaction could just be something that they have forgot about.
But should those transactions really turn out to be fraudulent, you are actually encouraging the scammers to carry on with their work.
So always report suspicious transactions or at least call up your bank to clarify what they are all about.
On another issue, banks are actually very flexible on customer requests as long as they are not ridiculous. Asking the guy on the other end of the line to write-off your debt is ridiculous. But asking for fee waivers and lower interest rates are pretty fair requests when you have been a model paymaster for a long time.
Call center officers have the authority to grant certain freebies. What you want could be within their power to grant immediately. Just ask.
4) Watch out for promotions
When a bank calls you out of the blue and offers something like an insurance plan to you, you intuitively feel that it must be a great deal as the bank must have used their bargaining power to negotiate a great deal from insurers.
And it is such a great deal that it is worth their marketing budget to actively reach out to customers to promote them. But when you research the market yourself, you will often find that the “deal” is not so much of a deal after all.
Lenders often market their products in a way that resemble teaser rate loans. It looks fantastic on the outside. But once you lock yourself in, the future doesn’t look so bright after all.
So always be wary of promotional items that your card issuer is promoting to you.
There was a time when I was almost suckered into an auto insurance plan bundled into the car loan. At that time, I assumed that it must be a good price for the policy on the market. I found out later that I could get an additional 10% off the premium when I sign up with the insurer direct.
5) Pay your bills
If you are living a lifestyle that requires you to spend more money that you earn, it is definitely time to review your lifestyle. When the only way to sustain your lifestyle is to live on credit, you already know the bumpy road that lies ahead.
Credit cards should be used more for convenience and rewards. Those should be the main benefits and features you sign up for them. And of a lesser extent, the odd months which you need a little extra money you can draw out as a cash advance.
The point I’m trying to make is that you should always be in a cash flow situation whereby you are able to repay your credit card bills in full each month. The only way you should allow your financial appetite to grow is when your personal income grows with it.
Interest charges, late payment fees, bad credit, etc, are reasons enough to keep you disciplined.
6) Use cash management tools
You might be surprised to learn that your lender is more concerned about you getting out of control than you yourself.
Banks know the lifetime value of a customer is huge. They also know that the losses from a less desirable customer can be huge as well.
This is why banks offer free cash management tools and services that help you keep your own spending in check.
Notification services can for example, notify you of overseas usage, large transactions, excessive use, etc. Make sure to make the most of these free services to your advantage. Most of them make the most of technology and you can activate them online in your internet banking account.
Online banking also allows you to link up account from different banks making it easy for you to transfer funds around. They also have payment systems integrated so that you can pay for your bills easily. Use them to pay your bills while accumulating your rewards points and cash rebates.
The time and hassle saved from such convenience can be priceless to many.
You are going to pay your bills and expenses anyway. You might as well make the most of technology to make it as effortless as possible while reaping a little reward.