Hailing from a rural area, my family never had a credit card. In fact hearing all the horror stories with its abuse, our view of its use borders in calling it as the spawn of the devil. After I graduated in college and started working I pretty much stuck with the “cash only” principle. That principle could not go wrong as it forces one to live by one’s own means, dispensing only cash that is available to you. That in itself is a fallacy that I will touch on later.
The company I worked for issued me an American Express gold card when I was assigned to Finland. The card remained largely unused as charging something on a plastic is a very alien principle to me. I even made it a sport heckling those call center agents who hawked pre-approved cards. However a couple of years ago I gave in and got my own credit card (with an extension to my wife who also dislikes using credit cards because of her own personal reasons).
What happened? My reasons were actually simple when you think about it:
- The argument of keeping within the “cash only” transactions will result to living within your means is definitely not true. It can help if you don’t have the necessary willpower to known when you can and cannot afford an item but its not enough. Even without credit cards one can easily fall into deep debts. I have seen that happen. Any vice and addiction can turn around one’s fortune as quick as a stock market crash.
- Living within your means can extend to credit card use, with the bonus of having the convenience of plastic. I don’t charge anything to my card that I cannot pay the next day. The next day, not the next payday. This is where willpower comes into play.
- Credit card allows me to pay the exact amount. Unlike in the US where every penny counts, the Philippine centavo has fallen away into obscurity. How many people today can say they still have seen what a centavo looks like (yes the one with Lapu-lapu). Groceries and department stores are rampant in specifying amounts to the lowly centavo but does not have any change to spare that they round off the amount to the nearest 25 centavos. My credit card is from my bank so I can pay the exact amount down to the centavo when I settle my bills online. Every centavo counts, right?
- Ease of accounting. My online statement allows me to keep track of my expenditures. I use Budget Pulse to keep track of my liquid finances and even if I miss entering my expenses daily I can always fall back on the bank statements to keep my accounting sane.
- Freebies. My credit card has some nifty freebies every 3 months; may it be free pizza, frozen delights, pulvoron or fast food goodies. The amounts needed to avail these have gone up but if I total all the freebies my wife and I have availed then they would have already paid for the yearly membership fee of our credit card. Which brings us to…
- Almost free membership. Well I still need to pay Php1500 per year but for the last 2 of the 3 years I have been using the points earned by my credit card to pay for that yearly membership fee. This year the rep waived the membership fee and reversed the charge on my credit card because of my good standing, and also because I called.
I only maintain 2 credit cards: the one from the company which I dont use and the one I have now. Overall its a good deal as long I keep on minding how I use our credit cards.