Give Credit When Credit Is Due

One of the valuable lessons my Ma taught me about basic good manners and right conduct is that when you borrow money, you must pay on time. However, when circumstances do not allow you to do this, Honor demands that you suck it up and inform the person you have borrowed money from regarding the delay. While the lender would most likely verbally abuse you and insult you, it's his integrity that he's throwing away, not yours.

The whole point of borrowing money is that the need arises from a temporary shortage, and the debt can be paid off using future excess/surplus cash. It does not make sense to borrow money to finance a lifestyle that is not affordable. It is irresponsible to do so. There are exceptions to this of course, i.e. student and education-related loans, or study-now-pay-later schemes. These exceptions would be similar to a company's taking on more debts (even beyond its present paying capacity) to finance investments in new assets to increase its future production. Such moves really make a better lifestyle more affordable so to speak in the future.

People who are responsible should not be afraid to take on debts since this helps to facilitate cashflow management. With better cashflow management, more informed spending choices can be made.

People who are smart-er could use the credit system even without additional cost to themselves and still come out big winners.

1. Take advantage of Zero Interest Installment Schemes.

Most credit card companies offer this in conjuction with department/appliance/electronic stores. I see this at least in both the Philippines and Hong Kong. Some finance practitioners say these are really not zero interest since the costs would most likely be already imputed in the supposed cash price. Yes, but you'd be at a disadvantage if you do pay these types of purchase in cash since you'd technically be subsidizing the next person's credit purchase on installment.

Still, some people with cash shy away from this promotion under the misguided belief that they are better off having no future obligations. The real issue though here is that these same people lack the discipline to set aside that same amount (somewhere in a bank where it can earn some interest at least) and not spend it on something else more frivolous. Having the cash set aside instead of paying the purchase lump sum actually gives you some flexibility should an emergency arise (hospitalization, burial, etc). How many times have you heard people regret buying a new Home Entertainment system when they could have used the cash to help a relative who got into an accident? Or some other variation of this?

2. Use your credit card and accummulate points that can be exchanged for rewards.

I saved more than HKD 1000 when I used the points I accummulated to redeem the computer bag that I am using now. There was no cost to me. I just used my credit card for my monthly spending (groceries, etc) and made sure to pay the debt on time. The bank is unable to charge me interest, I earned points, and I got my rewards.

3. Use your charm and have your annual fee waived.

Speak up and when that annual fee comes up in your credit card statement, give your customer representative a call. If your statement is all current (e.g. no overdue balances), you can always bluff (or be real) about canceling your credit card because you don't want to pay the annual fee. Even with the current supposed credit crunch, credit card companies are still lining up offering all kinds of incentives to new joiners. If you have a healthy credit history, they'd surely want to have you in their list.

Obvious as it may seem, the key really is DISCIPLINE. Without discipline, none of the above would work. But nothing else really can work sans the D word.

Don't be afraid. Use your credit card. Wisely. And if people ask you why when you have the cash, mouth that line made famous by the movie Bikini Open, "Because I can."

And you can and you should take advantage of all your credit lines.

email: steve78ph@gmail.com