• Canadian Capital One credit cards

    Using Credit Cards as a Financial Tool

    As I'm watching the economic news, it's hard not to hear headlines of credit card defaults, and other problems people are having.

    People have been using credit cards as a source of income, when they should be using them as a financial tool.

    The best example of using credit cards as income is when an individual purchases and item or service when you don't have the cash in reserve to pay off the balance in full every month.

    This of course leads to individuals carrying balances on their cards, which usually increase over time.

    I recommend that people use credit cards as a financial tool.
    This means that you take advantage of the credit cards benefits, excluding being a source of income.

    Some of these benefits are:
    1. Convenience to make purchases online
    2. Saving money on ATM withdrawals
    3. Receiving rewards for credit card purchases
    4. Receiving 30 days of free money

    Convenience to make purchases online
    This is one thing I use credit cards for all the time. I like to purchase software or training programs online, and of course I can't pay cash or debit card. Online companies only take payments from Paypal, credit cards or other online payment services.

    Many of these services I cannot find locally, and in order to stay competitive in my business, I need to have competitive software and training for that software.

    Saving money on ATM withdrawals
    I learned this lesson the hard way.. I used to use my debit card at ATMs alot . I want to pay cash for things but my service charges were adding up quickly.

    I decided to pay for what I normally purchase using credit card, and then promptly pay the credit card bill when I receive it.

    The credit card companies don't make you pay service charges for purchases so you can do a bunch of them with out paying.

    Receiving rewards for credit card purchases
    I use my Canadian Tire Mastercard to buy things. I receive rewards with with I can use to buy things at their store. This is a great way to purchase household items using points.

    At one point in my business, I was getting $100 per week in Canadian Tire points, and it was fun to go and spend them, as I knew the purchases weren't costing me anything.

    Receiving 30 days of free money
    If I make a purchase today, I generally receive 30 days or so before I need to make a credit card payment. That means that the money stays in my account for 30 days, and then when I make the payment it's one payment in stead of many.

    In essence, I am using the credit cards money for 30 days while I earn interest on the money that's sitting in my bank account.

    These are reasons why credit cards are actually useful. Again, credit cards shouldl never be used as an income. If you're using credit cards as an income source and don't have the cash reserve in place to make full payments each month, then you're probably in trouble financially.




 
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7 Comments
On Nov 13, 2009, Cribbage Said:
At one point in my business, I was getting $100 per week in Canadian Tire points, and it was fun to go and spend them, as I knew the purchases weren't costing me anything.
On May 5, 2009, Financial Spread Betting Said:
Never considered of this gracious point thank you a lot. I practiced this to my feed and appears to be working. Wonder how numerous airted connections I experience around from concerned in familiar bloggers blogs that give notice luv simply are pointing to my provender.
On Mar 31, 2009, Invoice Factoring Said:
Today Credit cards are use for anything from petty things to even employee wages. That's how a friend of mine got indebted while not managing his cash flow correctly. For exemple, if you are a business owner, considering 'Invoice Factoring' can put you out of trouble...
On Mar 24, 2009, Monty Loree Said:
Good point Joe!!

That's the idea... credit cards should be used as a tool to help the person.. not get them into a hole.

Thanks for your comment.
On Mar 24, 2009, Joe Morgan Said:
Great points.

I've been using credit cards as a tool (instead of the other way around) for 5 years now, and it's especially good with reward cards.

I'd also like to add that in addition to having 30 days of free money, if you keep that money in an interest bearing account then it's free interest income as well!
On Mar 18, 2009, Monty Loree Said:
Good point Canadian finance.

That's the way credit cards should be used... buy something and then pay it off immediately when you get the statement. This means that you have cash in the bank.

Use the credit card as a tool, and not a source of income.
On Mar 17, 2009, CanadianFinance Said:
I use my credit card for pretty much all my purchases, then pay the balance off at the end of the month.

I would add that it also protects your from all the debit card scams that have been happening the last few years.
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