10 Credit Card Commandments

Of all the items in your wallet, none other is smeared in as much negative stereotype as the credit card. The moment you whip the shiny plastic out, people automatically assume that you’re in debt.

But the reality is, not everyone sporting a credit card is rolling on borrowed money. With a little financial sophistication and suaveness, your credit card could be the key to bountiful savings, exclusive privileges and lots of free stuffs that cash payers will never get to enjoy – all hesitantly paid for by the bank and at zero cost to you. Zilch!

But be warned, to enjoy all these without getting burnt is no walk in the park. Your credit card company and banks will try their best to make money out of you through high interest rates and all kinds of hidden fees. Avoiding them while still being able to claim free stuff out of the banks is an art only a selected few have mastered.

Follow the 10 Credit Card Commandments carefully and you will beat them at their own game.

The 10 Credit Card Commandments

Credit Card Commandment 1: Your Bank is Evil until Proven Otherwise

Remember, your bank has interests that do not run parallel with yours. You, as a credit card user, will try your best not to incur any charges. Banks, on the other hand, will try to milk you out of every penny they can lay their hands upon. While applying for my very first credit card, the officer even tried to obtain my signature for loans that I do not need by asking me to sign on unexplained slips and forms. Their deception knows no end. Needless to say, I walked away.

Be vigilant at all times during the credit card application. Be wary of “special offers” or any other credit facilities that you do not need. They usually come with some kind of fees or interest charges.

Credit Card Commandment 2: Read the Card Agreement like a Novel

As always, the devil will be in the details. Be sure to familiarise yourself with the interest-free grace periods, important due dates and any other clauses that may work against you in the future. They could be hidden in an obscure part of the agreement.

If you see anything that you are not comfortable with, make it known with your feet and walk. The credit card industry is a competitive one and you are bound to find a better deal somewhere else.

Credit Card Commandment 3: Never, Ever Withdraw Cash from an ATM, Ever

Your credit card can be used to withdraw cash at supporting ATMs. But not many realise that withdrawals using this method will incur interest charges and fees that will make your local loan shark look like Mother Theresa.

Remember, cash advances made using a credit card do not have an interest-free grace period. This means you will be charged compound interest on a DAILY basis immediately upon getting the cash. Unless it is a matter of life and death, never, ever withdraw cash from the ATM using your credit card.

Credit Card Commandment 4: Back Every Purchase with Available Cash

During the credit card application, the bank will try to sell you a very costly credit insurance policy. It is a scheme that is meant to allow the bank to recover payment in case you get into an accident, lose your job or are simply incapacitated to pay.

People who buy credit insurance sometimes give hundreds of free dollars to the bank in their purchases by paying this premium. I say screw this expensive insurance and back your purchases with cash instead.

Ensure that every purchase you make is supported by an equivalent amount of cash that you have in the bank. In this way, if something does happen, you can arrange for the bank to deduct the amount due from your deposit. You will only pay for what you purchased instead of paying for something that may never happen.

Credit Card Commandment 5: Never Let the Sun Set Upon a Debt

There is a group of credit card users who will purchase items using a credit cards, and then immediately proceed to the nearest electronic kiosk to make payment for them in cash. In banking circles people like these are known as the deadbeats. They use the credit card solely as a method of payment to collect discounts and reward points.

Deadbeats annoy the hell out of banks. This is because they may actually be losing money on these credit card accounts. Having to maintain these accounts and pay for their rewards while at the same time not being able to make a single cent of interest revenue frustrates them a lot.

Be a deadbeat. Never let the sun set upon an outstanding credit card payment. Life is good when you can go to bed without debt. It cannot be over-emphasized; treat the credit card as a method of payment, not a line of credit.

Credit Card Commandment 6: Near Your Credit Limit Not

It is a requirement by law for your bank to inform the local Credit Bureau should you become delinquent in your credit card payments. On top of that, these systems will also flag potentially delinquent accounts to prevent these high-risk individuals from taking on additional facilities of credit.

Try not to go within 90% of your credit limit to prevent these unnecessary flags. You never know how a good credit score might help you in the future.

Credit Card Commandment 7: Avoid Instalments like a Plague

Lately, 0% instalment plans are becoming a very popular arrangement between merchants and banks. Banks love you when you go on these instalment schemes. This is because people paying on instalments are not eligible for their rewards points and are more likely to become delinquent – giving them the chance to charge hefty interests and late fees.

Try to purchase something only after you have earned the money. Don’t spend on something you have not yet worked for.

Credit Card Commandment 8: Get Online

In order to counter deadbeats and people who pay their bills on time, some banks are shifting the goal posts by changing the payment due date for some accounts. By employing this tactic, an increasing number of consumers are caught unaware, thus missing their payment deadlines and incurring those dreaded late fees and interest charges. This technique has proven to be quite profitable for the banks indeed. Best of all for them, the method is completely legal.

Another good reason to get online is to spot unauthorised transactions the moment they occur. While in London, a dishonest cabby billed me twice for the same trip. I spotted the discrepancy the moment it showed up and it gave me ample time to make rectifications.

Utilise Internet banking to monitor your credit card transactions. It’s always best to know your money movement in real time when you’re holding on to a credit card. Your reaction time will be much faster in case the unforeseen happens.

Credit Card Commandment 9: Reward Yourself, Not the Bank

You’ve done your spending and you’ve paid your bills. So comes the time to collect your big bag of reward points. You will be looking at some nifty free stuff like book vouchers, appliances, restaurant treats and many more.

But be sure to just reward yourself and not the bank. Topping up of these vouchers can only be done using the issuing bank’s credit card so be sure to try and redeem the voucher without the need to pay anything. It amazes me how some consumers redeem a $10 restaurant voucher but end up raking $300 in credit card bills as their “reward”.

Credit Card Commandment 10: Nobody Pays Annual Fees

It’s supposed to be an open secret but credit card companies will waive the annual fees once you threaten to cancel your card. Your credit card account is a potential source of revenue for them so they would somehow want to keep it alive, no matter how much it is costing them in rewards points at the moment.

Don’t pay annual fees. The moment this appears on your credit card bill, kindly give your friendly customer service officer a call and ask for it to be waived. If they refuse, just tell them you would like your card cancelled and you will be pleasantly surprised by their sudden change of tone.