Credit Card for most of us is kind a gold pot tool. Back of the mind for most of us normally were thinking this is another sort of income stream we may rely on. Considering your salary as the 1st primary source of income, Credit Card may be treated as 2nd source of ‘income’. This 2nd source of income normally acting as an emergency. Perhaps for the worst part is your golden ticket to fill up your pleasure. To gain from the satisfaction of your desire.
Credit vs Debit Card
Before we delve further into Credit Card, please have a look at this table. Big picture helps to make your wise decision. Differentiate between these two.
| Credit Card | Debit Card | |
| Function | Spend borrowed money from creditor | Spend directly from your Saving Account |
| Interest | Interest incur on any balance | Pay no interest |
| Rewards | Yes | No |
| Credit Score | Build credit history | No impact |
| Difficulty | Need to do credit check | Upon opening a Saving account |
Define your purpose
Now you know about it already. But hold your horse. Before you are planning to do things, please sit down and find somewhere decent to brainstorm. It will involve emotion. Moreover, do it while you may be thinking straight! This is what we called Behavioural Finance. Once you are at it, try to define your purpose of using Credit Card. What is this meant for?
Here is some idea for you to consider:
- Emergency usage
- If your are choosing this purpose, advisable to have a positive cashflow every month. If your cashflow is negative on monthly basis, you just made yourself vulnerable to become indebted.
- Earn rewards and cash back
- If you are planning to use it to earn something, this is a no brainer approach.
- Building your credit score
- For recent graduate, this is among many choices for you to make yourself visible in the eye of creditor.
Look at your budget
Now everything is much clearer to you now. It times to Credit Card selection. There are handful of Credit Card out there to be honest. Try to scrutinise it based on your spending percentage/block. For instance:
- Petrol
- Grocery
- Dining
- Shopping
- Travel
Let says your spending is heavy on petrol, you may want to choose Credit Card with more rewards on Petrol usage. Same goes to grocery, dining, shopping and travel. Not all Credit Card is the same. They have been built according to your needs and target market.
Stay discipline
When it comes to money, people tend to splurge the golden pot. Whenever new product or discount being displayed before us. This is a no go actually. Follow your budget on monthly basis. Once you have chosen the proposed Credit Card usage, please stick to it all the way down the road. Use it wisely. All the best!