Crash Course to Credit Cards: Why get one?

18 Feb
First 4 digits of a credit card

Image via Wikipedia

Welcome to my Crash Course to Credit Cards series! In this post, I’ll be talking about the pros and cons of getting a getting card. (Note that this post is intended for Philippine based readers as the banking system here differ from other countries specially the United States.)

Why a credit card?

First, let’s define what a credit card is. According to Wikipedia, “A credit card is a small plastic card issued to users as a system of payment. It allows its holder to buy goods and services based on the holder’s promise to pay for these goods and services.”

Simply put, a credit card allows you to buy goods and pay for them later.

Why would I need one?

I remember back when I was working at a bank that issues credit cards. Whenever a credit card holder requests cancellation, we tell them to keep the card for emergencies. True. You’ll never know when you’ll need extra cash. Suppose you have to pay for something today, let’s say, a hospital bill. You can charge it to your credit card for the meantime and then pay for it once its due.

Here are other reasons to get a credit card:
  • Deferred Payments. Also called installments. You pay for what you bought monthly. This is what couples usually do whenever they need something. An appliance maybe. You get charged for the whole amount of what you bought but it gets spread into small, monthly payments making it easier to pay.
  • Security. Imagine going to the mall to buy a Php40,000 LCD TV in cash. With a credit card, you don’t have to physically carry money with you.
  • Convenience. You may charge your utility bills onto your credit card. That way, your credit card pays for your bills promptly. No need to worry about missing due dates.
  • Bonuses. Some credit cards earn points with usage. You can exchange those points for items or miles. With HSBC, you can get a tall beverage from Starbucks with a minimum purchase of Php2,000. With Citibank, you get movie passes for a minimum purchase of Php1,500. (Note that these are current promos and may end soon.)
  • Exclusivity. Some credit card companies offer special or VIP access to events like concerts and sale events. Others offer store discounts.

Those are the main advantages or perks of owning a credit card. But be warned, owning a credit card entails much responsibility or you’ll end up with a bad credit history. (More on this later in the series.)

If you want more first-hand information regarding credit cards, its better to ask someone who owns one. Ask a friend or a family member and know what its like to have a credit card.

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