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10 Keys To Use Your Credit Card Smartly

Credit cards, for many people, are their worst enemy. However, if we are financially wise, we can make her our best ally . Or at least, in one of the tools that allow us to really facilitate our financial life and that its benefits are in our favour and not against.

Key # 1: Don’t Use It If You Are Not A Judicious Person
First of all, you must be a person who has the discipline of being able to use your credit card only when it makes sense.

If you are one of those who, because you have plastic in your hand, get carried away by promotion in a supermarket, or clothing store, or make expenses “because you deserve it”, just thinking if the 24 instalments suit you monthly … not you are a person apt to use credit cards.

The first thing you new should know is that not everyone gets along with a credit card.

Why? Because credit cards allow you to have a quota, sometimes much more significant than you could take to get into debt intelligently and dispose of it in the way you want.

It was even buying things that are not profitable and spending money on issues that will not produce any return.

Therefore, those people for whom credit cards become their enemy are people who either did not have the education about how to use them well or were out of control by impulsive purchases.

And eventually, although I believe that we can all learn to overcome this and be smart with credit cards, you have to know that sometimes it does not make sense to use them, which applies to many more people than we think.

So before continuing, we must very consciously analyze whether or not we are suitable to take advantage of the benefit they can provide us.

Key # 2: Choose Your Credit Card Wisely
Preferably one without a handling fee, which does not charge you insurance for being “in debt” or for having made purchases.

Some cards charge you for every million pesos, or for every X amount of money you have in purchases, insurance in case of any eventuality, in case of not being able to pay, or life insurance in case of death to cover the debt and so on.

Other cards do not have this insurance; they do not have these costs and what they do is cover it for you because they all have a policy.

And also, preferably a card that gives you benefits.

The fact of not paying interest at an instalment would seem standard in the industry …

However, cards such as the Yellow Success Card, the Ideal Mastercard, or the Bancolombia Free American Express charge you interest from day one.

Besides, they do not give you points, or miles, or cash back and the user will always be linked to interest … And the worst thing is that they show this as a benefit because they do not charge a handling fee or because they charge an economical handling fee, which doesn’t make sense at all.

You have to new know-how to choose very well which card, and if at the moment the only thing you can get is one of those bad cards, it is better to wait and try to make a credit history in other ways until you can get a card that is worth it.

If you choose, consider one that truly aligns with your goals (and one goal should be not to waste money on unnecessary expenses like the ones I mentioned).

Key # 3: Put All Purchases, Absolutely All, At 1 Fee
No one can go to more than one fee for anything in the world for no reason.

Suppose you need a loan to pay something in instalments, something that can generate a profit, an investment for your business, or something profitable. In that case, you should look for it in another way and not with the card … Not for an expense like an iPhone, or a TV, or something like that, because it doesn’t make sense (for those things you should save, the instalments should be savings, not interest expense).

So, it is using your credit card as if it were a debit card.

And the reasons for doing things like this, and for not using a debit card but a credit card, can be found here:

Key # 4: Use It For Everything
All the purchases you make, be it purchases in the supermarket, pharmacy, clothing store, or wherever you do with the credit card at one instalment.

Because in this way, you are accumulating points, you are making your credit history, and it is not costing you a peso, you are not spending on driving fees, and you are not spending on interest.

In fact, in terms of benefits, I have a video where I spoke precisely about how much I made with my cards. So, yes: I WON with my credit cards for using them for everything in one year.

Something significant is that if you do not declare income, you must consider the amount of consumption with credit cards in a year, preferably ask an accountant.

Now, if you exceed the consumption limit with a credit card, it does not mean that you have to pay tax (that is also something you should check with an accountant), but find out well and be competent in that regard.

Key # 5: Take Advantage of Credit Cards
Many people have cards with benefits they don’t even know about.

We are talking about having, for example, price protection insurance, which means that if you find a product that you just bought in another cheaper place, they will refund the difference.

Purchase protection, where if you lose something you bought, or it is stolen, or accidental damage depending on the franchise and its coverage, you can even cover a theft during the first 30, 60, 90 days according to the category of the card.

Travel medical insurance, accident insurance, roadside assistance, home plumbing, glass breakage, many things included in the credit cards and their franchises, and the associated insurance, and that people have no idea.

Apart from that, some credit cards benefit from access to VIP lounges at airports for national and international travel.

Key 6: Find Cards With Welcome Bonus
Usually, in Colombia, cards with a welcome bonus are linked to miles, not necessarily to points or cashback, although some have this benefit.

The welcome bonus means that they set you a goal, such as spending X amount of money in 3 months, or six months …

If you spend that amount, they reward you with a bonus, a 10,000 Lifemiles bonus.

Here you have to be wise and not fall into the trap that many fall.

What trap? With the idea of ​​achieving that bonus, many spend the required amount of money but at the point of unnecessary things, losing money, or worse, borrowing instalments.

It is not funny to do it like that; it does not make sense because the benefits will not cover the losses.

The idea is that you achieve the goal at the point of necessary purchases, which you still have to do, of things that you still have to buy.

Or even doing favours for friends or family, to buy things they need with your card since they give you the money immediately and with that, you pay it on your card.

Do you see? It is financial intelligence and maximum use of the benefits. This is how a credit card becomes the best ally.

Key # 7: Never Make Cash Advances
Because cash advances not only have a cost, which is close to $ 5,000 or 6,000 pesos for each passage, but they also produce interest from day 1.

That is to say that from the moment you take out the money, the interest starts to run, and as if that were not enough, you do not accumulate points, cashback, or anything like that.

The only thing you are doing is having money borrowed at an interest rate that, in addition to everything, is the highest in the market, usually the usury rate.

So, using money in this way is spending unnecessarily and not intelligently, on interest and many other things, therefore never do it, never make an advance on a credit card.

It has to be a huge emergency, an urgency, a situation where you have no choice.

Key # 8: Take Advantage Of The Discounts That The Card Has
Some cards give you discounts in a place, in a supermarket, or a store, whatever.

We don’t always align with them because not all the time we are going to require things for which we get those kinds of benefits.

Nor are we going to buy clothes every month, or household appliances, or things for which you have discounts with the card.

But you must know what discounts can help you at some point, and try to connect them a bit with those goals you already have.

The important thing is that the purchase decision is made based on all the other topics that we talk about in this blog, based on your budget, to plan if it serves you, well …

Not that the decision is based on the fact that you have a discount, far from it. Do you understand me?

Key # 9: Use It Abroad
Because when we are abroad, the conversion rate of withdrawing by ATM will cost us a lot of money, except that if I make an advance, it would be fatal to use cash.

On the contrary, the idea is to pay in businesses with a dataphone and preferably use a card such as Bancolombia, Mastercard or American Express, which have dollars, or like Rappi’s, which do not charge you those horrible surcharges that some banks charge you for doing the currency conversion fee.

We are talking that some banks like Scotiabank even charge you up to 4% for the currency exchange, outside of the conversion rate, that sometimes the conversion rate of Visa or Mastercard is a little higher than the TRM, depending on particular situations.

And especially if we talk about currencies other than the dollar, where some cards first convert to the dollar and after the dollar, make some other conversion, charging you two commissions for two mutations.

So, it is about choosing the card for abroad very well, and on the other hand, using it to pay abroad everywhere and not withdrawing cash from it.

Sometimes using that card gives you a better conversion rate than the foreign currency purchase rate and the dollar exchange rate. If you are going to travel to a place where you have another currency, you will have to buy at home exchange cash. But, of course, you will not be able to use the card everywhere.

But, where you can use them, it will represent a saving, and that saving if you spend a lot is very significant.

Key # 10: Take Advantage of Fraud Protection Benefit
It is practically a law that you have to answer for all the purchases you have not made.

It does not new matter if you have to do a process, send a right to petition, communicate with the financial consumer defender, or what to do …

Credit cards must respond to you.

And I know that there are many cases and horror stories out there, but you cannot imagine how they are with debit cards, or worse still, with cash where everything goes unpunished.

It is almost impossible that you, paying someone in cash, and reporting fraud, will respond to you.

While with a credit card, it has happened to me a few times that purchases that I do not recognize appear to me, and they return my money without a problem.

I don’t worry because the bank’s money is available on the credit card, and the bank cares about solving the case in its favour and not losing that money, so it gets on with it.

If it’s my money, then they don’t care so much anymore. And if it’s cash, nobody cares.

So, we have everything to use these cards wisely.

Unless that financial intelligence does not allow us to control ourselves, to be the right people to handle an essential resource like this, and in that case, it is better to take a step back and say, «no, for now, I am not going to use cards and rather I use cash, an envelope system, a debit card even”, or whatever it is that I have control over. On the contrary, if I have that discipline and can use it, I benefit greatly.

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