Frugal Spending - Credit Cards

Good morning, the weekend is here.

I am happy to sip on my hot chocolate and write my weekend post. We are heading to HDB council in a while to re-adjust our HDB loan. Our goal is to pay less interests, shorter our loan years and clear the house loan within 7 years. We have heard how our friends could pay off for their houses (Both living in EC) in 5 and 7 years respectively. Imagine that! This is what I call owning a real asset!

So anyway I said I would talk about credit cards. An average American citizen owns 5 credit cards. I believe the figure for Singaporeans are comparable. I started using credit cards because I like the idea of the convenience of online payment, rebates and the points system which allow you to clock for airmiles or vouchers. But how do you manage the credit cards so that it works for you and not against you?

I have known friends who got into credit cards debts and it rolled into such a huge amount that they literally carry the debt for years. Credit cards, as you've probably guessed, represent the worst kind of debt. That's not just because you are likely to pay higher interest rates, than you would for a mortgage or school loan but because carrying a credit-card balance is an indication that you're overspending on a regular balance. A credit card lets you pretend that you can afford a lifestyle that's actually beyond your means - for a little while. Not only can you end up paying as much as 30% more for your purchase when we use a card rather than pay with cash.

It's heartbreaking to see couples who started off well in their marriage but winded up in divorce because of their financial debts. Money is often the number 1 issue that couples quarrel about. Thankfully Brandon and I have never quarrelled over the issue of finance before. Here are some tips on managing credit-cards.

1) Prioritize. I have a Everyday POSB Credit Card that I uses to pay for all my bills. When I get my salary each month, the first thing I do is to render the Lord his (Tithe), then clear all my bills and expenses. If you really ask me, the rebates are not THAT fantastic. Probably gives me some points to offset at Watsons.

2) Brandon has this habit of paying his credit card debt ASAP if he buys any big items. For e.g we bought L's crib and baby furnitures from Ikea, it added up about $700. He would not carry the balance beyond 2 days. He would pay off the loan amount the very next day. This is to avoid being shocked at the end of month. What the credit card is not telling you is, they are just waiting for us to screw up so that they can earn our interests for paying late.

3) If you can pay cash, you should. We often pay with our credit cards and forgot all about the debt. Then it all adds up and come to you at the end of the month. So often we wonder how did we ever spend so much money? Use cash, for food, for grocery especially. There is something painful about parting with real notes than using that piece of plastic card.

Ok, I got to go. We need to head to HDB then go see the gynae. I will be back tmrw. Frugal spending guys. It is far better to have financial stability than to enjoy the temporal ownership of the dress. Have a lovely Saturday peeps!