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7 Cool Credit Card Benefits We Seldom Talk About
When we discuss credit cards in a social gathering, we often joke about the evil they do when they make us buy the things we really want. It is as if buying things on credit is a guilty indulgence we lavish on ourselves.
The creation of credit cards is one of the best innovations in the modern world.
It allows us to terrorize shopping malls during sales events. It makes us look cooler compared to someone carrying a bucket of dollar notes. And it enables it to spend money we have yet to earn.
These benefits are the more obvious ones. There are however, less obvious benefits that should share the limelight as well.
1) Overseas reliability
We no longer have to buy more foreign currency that we actually need.
Before credit cards became mainstream, we had to forecast how much we would spend on a holiday trip and buy them at the money changer.
The tendency is to buy slightly more than needed so as not to get into a tight position at an unfamiliar foreign land.
Now we can afford to buy less foreign currency and even as little as half of what we need. The rest can be charged to our credit cards at their prevailing exchange rates.
While frequent travelers often complain about comparatively higher exchange rates charged by credit card companies compared to a traditional money changer, it’s not always about the numbers and making the most of your money.
For a safety freak like me, I like that I have a lesser fear of being robbed on a trip. I stand to lose less should it really happen.
And just by having to display less money when taking out my notes make me a less attractive target to criminals.
Call me crazy. Better safe than sorry.
VISA and Mastercard is accepted in almost any country you can think of. So unless you are traveling to a place where poultry is used as the means of fungible money, you can expect your credit cards to work abroad.
If we put it that way, we might as well say that we are saving more chickens and ducks by using credit cards on travels.
2) Travel insurance
I don’t know how and why this practice started in the industry.
But these days, you can get free travel insurance if you book your flights or travel packages with your credit card.
These perks are usually provided by the bank issuing the card.
If you are like me, you will have more cards than you can count.
I challenge anyone to answer correctly how many cards you actually have.
You can’t right?
When you are ready to make that air ticket purchase, take a look at which card of yours will provide free travel insurance.
The amount you save is not much considering the price of travel insurance. But why let the big corporations profit from you when you can get a third party to pay for it.
Anyway, when I was young, I felt that insuring my travels is a waste of money. I can take care of myself and believed that the chances of bad things happening are too remote to take note.
But as I got older, I cannot see myself without buying insurance for my travels.
Growing up does weird things to you.
3) Free money period
The time period between you swiping your card for purchases and the due date for settling the payment, is the period of free money.
You do not have to pay an interest on that money as long as you make the full repayment on time.
This is unlike a mortgage where interest is calculated upfront and repayments are made in installments which contain portions of interest and principle.
In theory this mean that you can put the free money into a deposit account and earn an interest. Then withdraw your deposits to repay the credit bills by the due date.
You don’t pay an interest, and earn and interest instead.
Isn’t that fantastic? This is a bad example.
But these free money periods can be very useful for businesses that need working capital to maximize profits.
A business can use credit to start a project and repay it by the time the client pays for the service.
If the cash flow cycle is below 30 days, a business can use credit cards to make money out of zero capital.
4) Cash back
I know many of us just charge things to our cards and pay the bills that arrive at the end of the month without going through the statements.
So many of us don’t even realize that we are paying less than what we have spent.
Where did the discount come from?
It came from cash backs.
Cash backs are exactly what they sound. Banks give you money for free by deducting certain amounts from your bill as a feature.
If you have a 3% cash back and spent $100 for the month, you can expect to only pay $97 for it.
Isn’t that nice?
We get to enjoy the ease of retailing with cards and get a stealthy discount on top of it. Why would someone not want a piece of the action.
If you wonder how your bank can operate at a loss and afraid that they might fail, you can relax.
Because merchants are charged a fee when you pay by card. In the end, retailers increase sales, banks make a cut, and you enjoy a discount. A win-win-win situation.
It’s not often you can say that in a three-way business relationship.
5) Reward programs
The thing I absolutely love about reward programs is that they allow me to get stuff that I want but never convinced myself to spend on.
Fine dining, free stays in 5-star hotels, heavily discounted theme park entry tickets, you name it.
Many of the freebies offered in reward programs are also things that I don’t think about spending on. It’s great to try them out for free.
Reward points are one of the hidden gems in credit cards.
6) Balance transfers
The beauty of a competitive market is that consumers stand to benefit. And very few markets are as competitive as credit cards.
Balance transfers allow you to transfer your debt on the card to another bank.
This means that if you find that the interest you are liable for is higher than a competing card issuer, you can easily say goodbye and transfer you balance to the cheaper program.
The best thing is that it is as close to hassle-free as you can get.
Just make a call to the bank to get a mobile banker to contact you. You then fill up some forms and like magic, it is done.
This gives banks an incentive to reward loyalty and retain their customers. Because if they fail to meet or exceed the consumers’ expectations, they can lose out.
Whenever a bank wants to do a test on the reception of a newly conceptualized loan product, who do you think they will go for to conduct the test?
Existing customers of course!
Be prepared to receive promotion flyers and letter about their latest offerings at very attractive prices. And annoyingly… the occasional spam call.
Things that I often receive in the mail include cheaper insurance plans, lower interest rate personal loans, higher interest fixed deposits, etc.
What more can you ask for as a consumer?