EARN and SAVE from CREDIT CARD

As life needs to be lived wisely, so is credit card.

If most people will discourage you to apply for a credit card, I would not. In fact, I am highly encouraging my friends to GET at least one credit card from all banks - only if you are committed to use this wisely.

On this post, I will share to you that the use of credit card WOULD NOT put the user in a DEBT - but rather give OPPORTUNITY to the user  to earn and save from it. How? Follow the rules...

First Rule: Don't SPEND when your Shopping Fund is ZERO, or below its maintaining balance.

Swipe your credit card, only if you have that amount in your shopping fund. Take note, I did not say if your WILL have that money in your shopping fund. SWIPE if you only HAVE.

Second Rule: Don't pay on a CASH BASIS as much as possible, USE CREDIT CARD.

If there's an option to pay it via CREDIT CARD at 0% interest. Take that! So you're Shopping Fund could earn more interest in the bank. This is also good for your cashflow. PLUS! You can also earn credit card points whenever you swipe - dependent on which card you use.

TAKE NOTE that this rule is only applicable if the offer is at 0% interest, and/or no discrepancy if you will pay it on a cash basis.

Example 01: A LED TV is being sold at following offers: (1) P12,000 for 3 months at 0% interest (2) P11,000 for straight credit card payment (3) P10,000 for cash payment. Which option you would choose?

My take here is OPTION 3. I'll pay it in cash. Why? Because my shopping fund's bank account can't earn P1,000 in one to three months time. Paying it through cash could save me more.

Example 02: A LED TV is being sold at following offers: (1) P27,000 for 3 months at 0% interest (2) P26,000 for straight credit card payment (3) P25,000 for cash payment. Which option you would choose?

My take here is to first check the latest credit cards' offers / rewards. I have past experiences that a credit card bank company offers to reward P1000 worth of SM Gift Certificates for a single receipt worth P25,000. On this case, I will take OPTION 2. Why? The P1000 I will save will be returned to me through the rewards of the credit card. PLUS! I will earn points by using my credit card, P25,000 would also mean 250 points for some credit card.

I would only choose OPTION 1, if there's no price differences as compared to straight payment and cash payment.

In short, choose credit card if it would only give you savings and rewards. (Which they normally do) :)

Third Rule: The TIME you use your credit card is important.

This rule is important to your cashflow and would greatly affect your shopping fund bank account's interest. Delay payment means you can use your cash flow on more important things first and/or contribute to your bank account's monthly interest. I learned this technique from my mom - who highly discipline us on this. In fact, we all have a credit card schedule in our wallet.

Here's how it looks like:

Example: If I need to buy groceries on July 15, 2013, I will usually use BPI credit card. Why? My purchase would only reflect on my billing dated August 14, 2013 (OK TO USE less one day), and will require me to pay on or before September 5, 2013. On this example, I have one month and a half worth of cashflow time and bank accounts' interest. (If you don't get it, please feel free to comment. I'll try to expound on it / answer any queries for clarification)

With this idea, I still wanted to ADD one more principle on top of what my mom taught me - DO THE MATH FIRST. Always check if the Credit Card's rewards would give you more value than the benefits of cashflow and bank account's interest. From there, I believe you can make a wise decision.

Fourth Rule:  Get to know your Credit Card and be UPDATED.

I mentioned earlier that you can earn POINTS by using your CREDIT CARD. There are variety of perks and privileges being offered by the credit card bank. All you need to do is to be UPDATED, and do the MATH. Compute on which credit card will give you the highest reward you like, versus the interest you will earn from your bank account (if you choose a credit card that is not right with your OK TO USE date). More often than not, I choose the Credit Card Rewards.. :)

I encourage you grab all the Credit Card you can get.. ! They offer a lot of freebies when you sign up! Plus, you have more privileges such as FREE ENTRANCE to some Conferences / Events, BIG Discounts on various Establishments, FREEBIES with a minimum spend amount, etc.!

To give you a motivational booster, I just spend my birthday at Marriott Cafe because BDO treated me a buffet meal and a birthday cake! When I brought my partner with me, I just spent P600! <I will post the pictures and the details of this event on my future post>

Till my next post! :D

Take the Saving System to your Shopping System

Like SAVINGS like SHOPPING.

We set aside savings because we want somehow to lessen our worries for the future. Our kid's education, our parent's health, and our retirement are just some things we are preparing for. These are what we consider important and necessities.

Likewise, we can have the same mindset in our shopping fund. I think most of us will agree that we deserve some rewards from time to time. A little rest. A little indulgent. A little gift for ourselves is like a tap on our back - for all the best effort we give for our families and work. Thus, like savings, setting aside a certain amount of money for shopping is also important - especially if we do not want to be in debt.

On this post, I want to share one main principle in savings that I also apply with my shopping fund - DISCIPLINE

As I discipline myself to set aside X amount for my savings, I also set aside Y amount for my shopping fund. (This is also same with the envelope system of financial gurus - though I only emphasized on the shopping fund.)

But DO NOT allow your Y amount exceed 50% of your X amount. For an example, if you are saving P5000 (X) per month, your shopping fund allocation should not be greater than P2500 (Y).

With this, you are both giving yourself a BUDGET and a LIMIT for shopping. BUDGET for you not to deprive yourself. A LIMIT for you not to be in debt.

If you are not good in self-control like me, I suggest you open a SEPARATE bank account for your shopping fund. So whenever you shop, you would only look at your shopping fund as your available money.

Zero balance means no shopping for us. But if you have save enough, you can ENJOY shopping without worrying about your savings.:)

P.S. Don't feel guilty when you have spent half or nearly full of your shopping fund (just like me), because in the first place, you have set up this fund to spend and to reward yourself. I will share to you more on how you can maximize this fund - buying more at a lesser cost.

Till my next post.... ;)