Tough times allow you to recalibrate your finances. If you’re still acing it in discipline and stewardship when it comes to your credit card usage, then good for you. But if you’ve been struggling to pay your credit card bills since the pandemic started, it’s time to reassess how you’re using your credit card.
Credit cards are great financial tools, but you don’t solely depend on them. Remember: how you use them can lead you to always being on top of your finances, being broke, or staying broke.
You can build a good credit standing with credit cards even in a pandemic. Here are some tips on how to use them responsibly.
#1 Pay your dues on time
We know that it’s easier said than done, especially when there are unexpected expenses popping up left and right. However, it’s best to schedule your payments 5 to 7 days before your due date to avoid late charges. Set aside funds once you receive your salary so you won’t be tempted to use them.
Opt-in for SMS and email notifications for timely reminders on when and how much you should pay. (If you have an AUB credit card, you can choose your own payment terms and due date.)
Avoid paying the minimum amount due as it will incur interest charges that could pile up once you make this a habit. If possible, pay the total amount due to maintain your good credit standing.
#2 Refrain from maxing out your credit card
In case you were retrenched during the quarantine, try not to max out your credit cards. This will only result in a ballooning balance on top of the charges and fees.
If you don’t want to be tempted to spend, lock your credit card temporarily. Citibank credit cards have this feature, allowing you to control the use and protect it from fraudulent online transactions.
#3 Use your rewards points
Check your earned reward points and find out how you can use them as payments. Some credit card issuers allow you to pay merchants using points or convert them to merchandise items, gift certificates, vouchers, and more.
Some banks even allow redeemable points to be converted to cash or use it to waive your annual fee.
If you have an air miles credit card, ask your bank if there are other options to earn points or rewards for non-travel related expenses.
#4 Reinforce financial discipline on essentials
Reinforcing discipline is challenging without the help of accountability partners to check your spending habits. Discuss your financial status with family members and review your monthly budget on food, utility bills, rent, and mortgage.
While food deliveries and takeaways are part of the new normal, you may want to stick with cooking your own meals. Not only is it much safer. You also save money.
Also, don’t get carried away by all the available shopping deals online. While there are many great deals out there, ask yourself if this is a need or a want.
For now, you can uninstall your Zalora, Shopee, and Lazada apps or unsubscribe from newsletters if they only trigger you to spend on non-essential items.
#5 Understand the Bayanihan to Recover as One Act (BARO) 60-day grace period
Congress approved the Bayanihan to Recover as One (BARO) Act 2 last September. Thus Banko Sentral ng Pilipinas mandated banks, quasi-banks, credit card issuers, and loan institutions to give borrowers a one-off, non-extendable 60-day grace period for existing, current, or outstanding loans.
As a credit cardholder, you should have received a memo from your bank regarding the guidelines. You can either opt-in to BARO 2 or continue paying your dues as is. Make sure you read the terms and conditions or directly call customer service for clarification.
For example, if your due date is on the 5th of the month and you were not able to make your payment for October, your credit card issuer will automatically implement BARO 2 for your account.
If you’re not able to pay on the 5th of November, the following month, you will not incur any charges and fees.
However, on the 5th of December, you need to settle your outstanding balances as recorded from October.
If you use your card without settling your dues within the 60-day grace period, the transactions you made in-between will roll over to December.
In short, on the 5th of December, it’s payback time — outstanding balances in October and November, plus new transactions within the period, all must be paid.
#6 Avoid high-interest loans to pay off outstanding balances
Refrain from borrowing money as much as you can, especially if the lender offers high-interest rates.
Watch out for these loan sharks that don’t require collaterals and promise ‘quick processing’ of loans. Be cautious about these arrangements that sound too good to be true.
Instead, try asking your credit card issuer for new payment terms so you can pay off your outstanding balance in installments. Just make sure your installment options are right for your current budget. Otherwise, you can be creating another financial problem and end up borrowing more money.
#7 Review limited time offers and 0% interest rate promos
As work and study from home arrangements become part of the new normal, you may likely need to invest in electronics or other productivity tools for yourself and your kids. Make sure you check and read the T&Cs before you avail any 0% interest rate promotions.
If you’re buying just ‘cause, maybe put off big purchases for now, or until you can pay it in full. During a pandemic, needs trump wants, and a credit card that has little to no outstanding balance can go a long way.
You have the freedom to spend. But in times like this, you need to exercise self-control.
Credit cards can help you stay afloat during a pandemic, but make sure you’re still spending within your means. Use yours with care until things go back to normal and you find better and more stable income streams.
Which of the following points mentioned above do you think should you practice now? Share your thoughts in the comments below!