Always spend using a credit card if you can. To people already chasing card rewards, I’m preaching to the choir. However, I still know many people who shun credit cards to their detriment.
Let’s move the obvious benefit of getting cashback and miles out of the way and talk about benefits that are not as noticeable.
1. Free loan
When you charge spend to a card, you defer the actual payment until the statement arrives, and there’s usually another 3 to 4 weeks before payment is due after you receive your statement.
Expenses made at the start of your statement cycle is hence almost 2 months of free loan. This is extra time that your cash gets to sit in the bank and generate you interest.
If your expenditure happens to be large – take $10,000 for example – that’s around $30 to $40 of interest for two months if you have a bank account yielding 2 to 2.5%. Not bad for simply paying with your card.
This adds up, so make it a habit to put everything on card if possible, and pay the statement at the last day or two before you are charged a late fee. GIRO arrangements help.
2. Build your credit score
If you don’t have credit cards or any other loans, your credit history should be great, right? After all, you don’t owe anyone any money. Not entirely true; having no credit history is actually a risk factor for banks when it comes to loaning you money in future. This may affect the amount, tenure, and even whether they wish to loan you money when you find yourself buying a car, a home, or taking a personal loan.
Start spending on a credit card and make regular payments to show lending companies that you are a financially responsible person so that your score improves. When the need arises, you wouldn’t want settling for a lousier loan because of your credit score.
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3. Buyer’s protection
Besides the fact that you can cancel your card if you lose your wallet while cash has not such protection, buying things with a card also offers you some recourse as a buyer if your product turns out to be a lemon.
Should the product you receive be in unsatisfactory condition and the retailer does not adequately address your issues, you can file a charge back with your credit card company who’d refund you your money if they deem your complaint to be legitimate.
My friend actually did this when he bought an incredibly dubious AirPods knock-off way below retail price.
Your mileage may vary depending on your bank and specific circumstances, but Citi was pretty quick to refund him his money in just 3 weeks.
4. Lots of exclusive deals and perks
If you’re unmotivated by cashback and miles, I’m not sure how enticed you would be by deals provided by card companies, but it is still a pretty big part of why one should carry their cards everywhere they go.
It’s really common for restaurants to give discounts – often substantial ones like 10% or $10 off your next visit – simply by having a particular bank’s card, and places like departmental and electronic stores tend to have closed-door sales for specific cards.
Best Denki hosts member sales every now and then, and I’ve been to two events so far where they gave 6% store-wide discounts for OCBC members. This was even for stuff like Apple products which tend to abide strictly by a fixed pricing, and there was even miles and the usual 2% cashback for OCBC Titanium Rewards, making a staggering 4 mpd + 8% cashback. Well, just couldn’t help talking about miles and cashback again.
5. Expense tracking
Depending on your bank, you may also get your expenses categorised neatly so you can plan your budget better. DBS, for instance, has a pretty nifty DBS Lifestyle app which automatically categorises your spend.
There are also apps like Seedly which scour your spending history to categorise your spend, and I think this is really useful for people who want to have a better insight into their expenditure.
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Any more benefits I missed? Have I convinced you to get a card?