It took me a long time to finally have a credit card. When my mom gave me one two years ago, a supplementary card, she strategically told me its credit limit was P2500. I was just excited to have an emergency card when I needed one so I didn’t give it a thought. I didn’t know that supplementary cards shared the limit of its primary. My mom had a pretty generous limit, you see.
Anyway, I only found out about this shared limit last year, when I misread a price tag and thought it was P2500. It was actually P3900. When the sale pushed through, I asked my mom and she laughed at me. Told me I was pretty much naive considering I worked for a bank for a short while. And get this, I even handled credit collection for their credit cards! Oh, the irony of life!
After that, I studied credit cards like I was born to do only that and today, I am proud to say I handled my money well and what’s more, I even gained a few perks because of proper credit card management. Here are a few tips in understanding credit cards:
What to Pay and What Not to Pay
Know which stuff you should pay for and which ones you need not to. There are other credit card companies that include seemingly small monthly payments for insurance or whatever, so look at your statement and remember every transaction. It also helps to keep your tape receipts for credit card transactions so you can track it. Additional tip: you can actually waive the yearly membership payment, just give them a call, be nice and make sure you paid well for the previous year.
Know Your REAL Limits
Gadgets at only P2,000 a month? Love booking super cheap trips everytime a sale comes around? Whoa, don’t get too carried away. Whenever you get your statement, if you pay within a month, your payments will not gain interest. However, if you just pay the minimum amount, that’s just the amount that you pay so you can keep using your card. If you don’t pay in full after one month, interest will already run. So if you have a P40,000 balance and your statement says you only need to pay P3,500, you’ll still pay around P1,200 in interest next month. The goal is to keep the balance low and to keep your payments interest-free. (Also, this is the reason why they keep raising your limit if you pay regularly with the minimum amount. It’s a trick to help you develop a sense of fake wealth. Careful careful.)
Remember Due Dates
Credit cards CAN let you borrow money without interest. They help you make big purchases without having to shell out money (hello interest-free 6-month plans). The trick here is to pay everything due that month before its due date. Due dates run between 1 – 2 weeks from receipt of statement. So keep a reminder alarm in your cellphone, put a post-it about it in your refrigerator or you can even have it henna tattooed on your arm so you won’t forget. Penalty is usually P600 or 2% of what’s due, whichever is higher. And remember, that’s the amount you pay for simply FORGETTING the deadline.
That’s it. With great credit limit, also comes great responsibility. Manage your credit card well and it can actually help you a lot in managing your finances in general.
For more info, you can also check out this related article on Why Credit Cards May be Good for You.