A lot of people feel a little fear whenever they are suggested to get a credit card. Especially Filipinos, most of us have a lot of myths about credit cards. We think that it causes overspending and that only rich people can afford it.
But the reality is, credit cards cannot affect us if we know how to use it properly. And the secret on having a good relationship with your credit card is to know when is the right time to use it and when NOT to.
If you’re still new to the credit card world, here are some few tips on what not to charge to your credit card:
When it comes to a medical emergency, you are tempted to turn to your credit card in paying your bills. Since some big hospitals are already accepting credit cards as a form of payment, you make think that this mode of payment is efficient but it’s not.
According to NerdWallet, “you’ll want to use cash, non-retirement savings or a low-cost loan to pay your medical debt,” paying a 1.37% a month interest on a large P500,000 hospital bill can easily put you into deep debt.
Gambling and Gambling-related Expenses
If you’re thinking about using your credit card for gambling, you might wanna turn around and go home. Charging your gambling expenses in your credit card is a big NO.
Think about the monthly interest that you need to pay and all the extra fees that can add up on your card. From the moment you used your credit card to fund gambling, interest is being charged at a high rate and it will continue to be charged until the balance is paid off in full.
Just like in gambling, a cash advance has a lot of extra fees. For instance, a 4% fee on the amount you withdrew as an extra fee.
If you decided to take out a cash advance of P5,000, you’d end up owing P5,200, that’s effectively an interest rate of 15% with no grace period.
Yes, most schools and colleges are now accepting credit cards as a form of payment. But it doesn’t mean that you have to.
For example, one semester in a private college is around P84,000 or P168,000 a year. If you charge that to your credit card, you’ll be paying 3.5% interest a month right away, which could mean 51.11% interest a year. Yikes!
We’re not discouraging you guys from having a credit card. There are some situations where paying via credit card is better than paying in cash.
But always be wise and responsible enough to know when to use your credit card. “With great power comes great responsibility” so better spend wisely.