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Purchase that television on October 21, give or take a day or two. You will get free credit till December 11 (around 51 days).
And what's more? If I took a personal loan to make above purchase, I would be dishing out an interest rate of around 18% per annum (around 11% if I took it from my company). Here, I get interest-free credit on my card!
How to plan your investments It gets you out of trouble
Specially when you have to make birthday and anniversary gifts to your girlfriend and you are either low on cash or gift is too expensive (often both).
Let's say I earn $2000 a month, out of which I spend $1000 on living expenses. Now, if it is my girl friend's birthday and I plan to buy her a necklace worth Rs $2,000, I may not have that much saved.
The way out? Buy it on my card instead of waiting to accumulate that amount in my savings and gifting it to her a month after her birthday.
When my credit card bill is finally presented to me, my salary would be credited to my account and I would have accumulated enough to make payment.
Save AND repay your loan It acts as a budgeting tool
The problem with spending cash is that you never know what you spend on. With a credit card, billing statement is a reality check. Video: http://www.hardwaresoftwarearticles.com/archive/index.php/f-10.html
I closely study my statement. This gives me a fairly good idea of my spending pattern.
At a glance, you can tell where bulk of your salary goes: books, entertainment, shopping, petrol or on essentials.
Should you save or prepay your loan? Use it, don't get used by it
Sure, card does have its limitations (which I mentioned earlier) and setbacks too.
Credit card frauds (specially over internet) are increasing by day.
And, if you are not careful, it is very simple to indulge in a high lifestyle, convinced that you can pay off your debt later. Once you spend more than what you can afford, you are forced to carry over balance amount to next month. And that's when your credit card becomes your enemy. Now you pay heavily for this money – at least 24% per annum. Music: http://www.hardwaresoftwarearticles.com/archive/index.php/f-8.html
But, if you use it well, it is a handy money management tool.
Not to mention all points that would accumulate eventually which can be exchanged to make a purchase or get a gift. Alright, it may not be a great bargain but nevertheless, it will cost you nothing.
In some cases, you get some amount of money back under "cash back" scheme. In others, if you are paying an annual fee, you can redeem these points against fee. But do remember, nearly all cards being issued these days have free lifetime membership. Hardware Software Articles
So while I respect my colleague's opinion, I am quite convinced that I do not want to live without a card.
Adam Fletcher is the webmaster of Hardware Software Articles http://www.hardwaresoftwarearticles.com .