Getting the most out of your credit card

This April, Jaime Guloy intends to charge his son’s tuition as an incoming high school freshman to his credit card. "I don’t get my mid-year bonus until May," he said. "If I don’t pay the tuition next month, I will have to pay a penalty for late enrollment, at best, or look for another school for my son, at worst."

Guloy is one of an increasing number of cardholders who have discovered they can use their credit cards for more than just shopping.

"Also known as plastic currency, a credit card today is accepted in nearly all establishments for any and all types of expenses," said Citibank assistant vice-president for marketing Liel Gonzalez. "With your credit card, you can pay for a dream wedding or fly off on a grand vacation or set up a business."

With most banks offering credit cards these days, customers need to look for the one that will give them the most value for money. Value comes in the form of discounts that make paying in credit better than paying in cash, low interest rates and longer payment terms.

In Guloy’s case, for example, the value added of having a credit card is that he can pay for his son’s tuition on time without paying a penalty for late enrollment. He also has the flexibility to decide the payment terms that range from as short as three months to as long as 12 months.

Smart charging

Guloy intends to pay the entire amount he charged to his credit card when he gets his mid-year bonus. By paying the entire amount within the next 30 days, he will have used the credit card company’s money for free or without paying interest.

Free credit can reach 60 days, depending on when the credit card is used.

Each card has a billing cycle or when a cardholder has to pay what he/she charged the month before. A purchase made close to that cut-off date will not be included in next month’s billing cycle but two months from now.

Most cardholders, however, prefer to settle their expenses in monthly installments. "They like the comfort of knowing how much money they need to set aside every month as opposed to a huge cash outlay up front," said Gonzalez.

Increased competition has also prompted credit cards companies to segment their markets.

For example, Citibank offers co-branded credit cards that give rewards to their targeted market. The Shell-Citibank Mastercard gives car owners fuel rebates for all expenses. A Gold card gives frequent travelers and a companion free access to Northwest airport lounges around the world.

One of the most recent additions to the Citibank portfolio is the Clear card for the young market. Cardholders get a 10% to 15% discount in "gimmick" places and retail outlets as well as a Starbucks upsize offer, which upgrades the size of the coffee order at no extra charge.

"A credit card opens up a whole array of goods and services to the cardholder but it should be treated with respect and responsibility," said Gonzalez. "The cardinal rule is: ‘Know yourself.’ This means you must know your capacity to spend, know your pattern of income and expenses. Don’t overload yourself in spending."

If these simple rules are followed, the cardholder and his credit card will never be parted.