Starting this new blog to discuss different credit cards and how to maximize their rewards ethically. I know there are a lot of forums for this, but my purpose of starting this is to document my learnings about credit cards and try to explain it to anyone who wants to begin their journey with them.
As my circle goes, a lot of folks are quite apprehensive of using credit cards. And few also look down upon them. So I thought the best way to explain would be writing about it and sharing details one piece at a time.
So my journey with these oft looked down upon plastic began way back in 2017. Back then even I was wary of them, since I had seen a few very close people get stuck with the credit loop. And to be honest that scared the living daylight out of me. My first credit card, which I had got with my salary account for free, was rotting away in a drawer somewhere.
But a couple of years into my own corporate life, one of my seniors explained to me that they would only use cards for all purchases and then pay back the entire bill. I found this a bit strange.
“What is the benefit from this?” I asked, with a puzzled look?
“Well, you see, when you have a history of paying back credit card bills on time, your credit score builds and improves. And this will help in the long run if and when you want to take home loans, education loans etc. And a better credit score will also help you in getting a slightly better interest rate on them. Won’t be a lot but something is better than nothing right?” they replied.
I was kind of taken aback, for me this was brand new information, and I had never looked at credit cards that way! As a middle class boy, I had always thought of buying a house, and this seemed like a good way to position myself for it in the coming years!
Slowly I started to follow this advice. Started swiping my credit card wherever I could instead of my debit card or cash. And would pay the whole bill in one shot. For me, it was to steadily build my credit score for the next few years. And also making sure to not get trapped in the credit loop.
Looking back, I think these were the steps that helped me build a mentality that is benefitting me now a lot. As it cultivated a very very important value in me - “Always pay back in full and on time!”
These two are the most important aspects of using a credit card I feel. If one has the mindset of always paying back on time, and the full amount, they will never get trapped in the two most common issues people face with credit cards - overspending and getting stuck in a credit loop where they keep paying smaller amounts as the interests keep piling up.
For a disciplined mind, credit cards are one of the most important and useful financial tools. But for someone who is not financially disciplined, they can be the harbinger of doom! People get stuck with EMIs which are more than their salaries, and to pay them back they take personal loans! This is the credit trap I was talking about earlier.
My hope with this blog would be to try and educate folks on how to develop a correct mindset to use this financial tool in the best possible way. Even if I am able to change 1 person's mind, it would be a win. In an era of ever increasing taxes and inflation, it is prudent that we find out means to at least get something back. And with that in mind I am starting this series.
It would also be fun, if you, the reader, wants to know about a certain card in detail. Drop a note in the comments section. I will try to pick that up.
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