Growth & Jobs | A credit card can be a great way to save - banker

A CREDIT card is a great financial tool that can help reduce financial burdens and save you money, says banker Warren Wilson, if it is used correctly.

His advice comes as the world this month will observe World Savings Day on October 31.

“A credit card is actually a free loan if used properly,” he said, “and can save you money in different ways,” he advised.

To begin, one must first choose a credit card that is right for one’s lifestyle, explained Mr Wilson, who is head of Credit Card Sales at JN Bank.

“Don’t get a card with a limit that far exceeds your monthly expenses as this may create the temptation to spend more than you can afford to repay. Your credit card should really be for needs and emergencies, and you should only use it when necessary and repay the balance before the due date in order to avoid interest charges and other penalties,” he advised.

He continued: “A good way of keeping yourself honest is by not using your credit card to pay for items you would not have bought if you had only cash. Therefore, before you spend, assess the reason you’re using your credit card to make the purchase.”

When choosing a credit card, one should also assess the added benefits the card provides to see whether they also match with your lifestyle.

“There is no point in getting a card that affords lots of benefits on travel, for example, if you’re not much of an adventurer. Instead, you may want to get a card that perhaps offers a low as possible interest rate or one that offers you rewards and discounts whenever you use it,” he recommended. “That way you’ll have an opportunity to save in other ways.”

He noted that by using the JN Bank Visa credit card, for example, cardholders benefit from a low interest rate of 34 per cent, which is charged on the reducing balance, and one can access discounts ranging from five to 20 per cent from more than 100 merchants locally in the JN Rewards programme.

In addition to rewards and discounts, placing your monthly expenses on your credit card also helps with avoiding small fees that add up, such as point-of-sale and ATM fees, as it reduces one’s dependency on cash and, therefore, the need to withdraw cash on a regular basis to pay for items and services.

“These little fees add up over time and can impact your monthly budget. But remember, if you are going to place all your monthly expenses on your credit card, be very vigilant and monitor it carefully so that you don’t overspend. And don’t forget to pay your balance on time so that you won’t have to pay interest charges and late fees,” he encouraged cardholders.

Plus, a properly managed credit card strengthens your credit profile, Wilson concluded, and underscores for financial institutions that you are capable of handling credit should you need to access a loan for any reason.

“For many young people, the first kind of credit they’ll be able to access is a credit card,and at a later point they may want to purchase a car or get an unsecured loan to get another asset, and their credit history is what a lender will use to determine whether they are worth the risk or even decide at what rate they will be willing to lend to them,” he said.

He explained that loans are almost a necessity for accessing capital for wealth creation, and with Jamaica now collecting and reporting on consumers’ credit worthiness through credit bureaus, one has to ensure that one is managing one’s credit card with care in order to maintain a favourable rating.

“Your credit card, therefore, when used correctly, will help to build your credit profile, and ultimately, your wealth. However, similar to all financial instruments, it takes discipline. Be vigilant about using it with care and protecting it,” said Wilson.