The following is a sponsored post from Citibank. Read our disclosure here.
For individuals who aren’t disciplined when it comes to money, financial experts understandably advise that they approach debt, credit cards and instalment plans with caution. But what if they could be used as tools to manage your money better and even earn bonuses? It’s what I do and it can be hugely beneficial.
Why I avoided credit cards and instalment plans until now
For years, I avoided credit cards because I knew I was an emotional spender. Getting my first credit card at 18, after years of being with the same bank, I didn’t even research it. I essentially turned 18, was offered one and promptly maxed it out in pursuit of reward points and happiness. It did not make me happy and I loathed having to pay it off.
I recognised my spending was emotionally based and I wasn’t budgeting or using my financial knowledge. After getting rid of the card, I opted to work on myself and avoid debt. No credit cards, no instalment plans, not even in-store laybys. I went cold turkey on it all until I felt I was in control of my money.
Over the past few years, I have used them again. I know I am in control of my money, my spending habits and I know the benefits. Credit cards, instalment plans and similar can be great wealth tools when used correctly.
How to use credit cards and instalment plans as wealth management tools
When used wisely, you can earn points to use for things such as flights, get specials, budget and essentially have your money working harder for you. As long as you are disciplined and stick to your budget, you can make and save money with credit cards and instalment plans.
1. Easy payments
While there are many instalment plan options, I tend to prefer having my money all in one place. For those unfamiliar, an instalment plan allows you to break up your payment into a series of instalments at a pre-determined rate. Now, banks such as Citi offer this service and for good reason. According to Citi research, nearly two thirds of credit card holders are worried about debt and over 80% of those surveyed who have used an instalment plan before want their banks to offer instalment plans. You can pay an unexpected bill, ease your finances or sort out something you need to buy with an instalment plan. With an instalment plan, your repayments can be planned ahead of time.
By taking up an instalment plan, you can keep your finances in one place instead of multiple payments and lenders everywhere. Last year, I trialled a couple of instalment plan providers when getting new things for our house. They were recommended by friends but personally, I found it difficult having my money and payments spread across different providers. I liked having my expenses broken into payments instead of one chunk of money but I didn’t like having my finances spread out in different locations. Login details were different.
I deal mainly with one bank, my expenses are direct debited and easy to handle. By dealing with one bank instead of multiple companies, it is easier to manage my wealth. I can log into one place, have a clear overview of my finances, instalment plans, income vs expenses etc. and manage it quickly.
2. Reward points
When used correctly, reward credit cards can result in great bonuses from travel to retail items.
Plus, there are often bonus offers when you sign up. I’ve seen from 10,000 to 150,000 bonus points with different credit cards. This can mean a free flight (excluding taxes, fees and carrier charges), groceries or similar rewards. (There are criteria you need to meet which is why it’s important to do your research before choosing a credit card).
How I manage my money
I have mentioned before on the site how I split my money, invest, save, splurge/sanity and spend etc. I was doing this and writing about it well before it was popular because it works!
Essentially, my bills are direct debited which is easiest for me. I know how much my bills and other expenses are. This money is set aside and bills are paid with a credit card. Then before it’s due, the money in my bills account is used to pay my credit card off.
I then have an account where 10% goes to spend on whatever I want but I usually buy it on the credit card and transfer money. Why use the credit card? To accrue points while my savings earn a small amount of interest. It’s a double benefit because I am disciplined with my budget and spending.
I invest 10% or more each pay and save at least 10% as well. This is what works for me. Do what works for you.