The Most Authentic Guide on Personal Finance and Investments

(Funny) Words of Wisdom : "Someone stole all my credit cards, but I won't be reporting it. The thief spends less than my wife did." ~ Henny Youngman

Shocking advice! Use credit cards more often than you use your debit cards

For some people who may still be confused between the two, in very simple terms credit card allows you to "buy now pay later"...whereas with a debit card it is "buy now pay now" situation. Using a debit card is as good as paying in cash.

Given (a) the dangers of getting into serious debt with credit cards and (b) the greed and desires inherent in human nature, it may indeed shock many that I am advocating the use of credit cards rather than sticking to the safer debit cards.

Yet, as credit cards enjoy some obvious advantages over debit cards, it would be smart to use them PROVIDED we are smart enough to use them judiciously (see warning later).

Paying later
One obvious advantage of using a credit card is that you get around 25-45 days (depending on date of purchase) to make the payment. This means that the money in your bank account keeps earning interest, while you enjoy interest-free period on your credit card (provided, you pay the bill before the due date).
Whereas with a debit card, the amount gets deducted from your account immediately.

Rewards points
Normally, all credit cards offer cash-back schemes, discount offers and reward points. Thus you can avail of discounts from time to time or exchange your reward points for many kinds of products. However, presently, only a few debit cards offer such freebies. Moreover they may not be as attractive as those on the credit cards.

Credit Score
If you buy regularly against credit cards and ensure that you always pay your bills before the due date, your build upon your repaying credibility. This helps you to improve your credit score. A good credit score would enable you to source cheaper loans and/or lower processing fees in the future.

If your credit card is stolen and a fradulent transaction is proven to be made, it is the bank which is out-of-money till the same is recovered from the criminals. Whereas if your debit card is misused, you could be out-of-money for a long period of time till the matter is settled. (In fact, carrying a debit card is like carrying your entire bank account in your wallet. It is definitely more riskier than carrying cash, which at best is often limited.)

For you to prefer using credit cards over debit cards, it is EXTREMELY important that
a) You will spend only to the extent of your needs. There should absolutely be NO splurging.
b) You will pay your bills BEFORE the due date every month, month after month, year after year
c) You will NOT USE your credit card to withdraw cash

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Ignorance is like a SIGNED BLANK CHEQUE... anyone can MISUSE it.

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