How to Transform Your Credit Card into a Financial Asset: A Conscious Approach

In the realm of personal finance, credit cards tend to be either overused and financially detrimental or not used at all, loved or hated and feared!  On one hand, they're touted for convenience and rewards; on the other, they're associated with high interest rates, facilitating overspending and irresponsible debt accumulation. However, when used with intention and awareness, a credit card can become a valuable financial asset. Here's how I've managed to turn my credit card into a financial asset as opposed to a financial liability.

Use it as an asset instead of credit or a liability

The key to transforming a credit card into an asset lies in the approach to using it and your purpose for it. Being conscious, intentional and well-informed about both the benefits and the risks associated with credit cards is crucial. It's not merely about having a credit card; it's about how you use it. This means understanding the full scope of what your credit card offers, including fraud protection benefits and leveraging these features to your advantage while constantly being aware and mindful of the dangers and pitfalls of using a credit card irresponsibly. 

I use my credit card for all my payments. I maximise my points accumulation and use those points for two main purposes. I pay for our family flights to Ireland every summer using airline points accumulated on my card. That saves me on average AED14,000 per year. I also regularly pay for my home internet costs using credit card points. In 2023, I saved AED4,462.50 by doing this.

After prompting one of my clients to check her credit card points, she found she had AED18,500 worth of unused points she previously had no awareness of! She is now working her way through them by converting them to cash pay-outs, upgrades to business class flights, utilities payments etc.

But this only works as I use my cards intentionally. I always pay it off in full every month. This is a non negotiable. Not paying the full balance on time will very quickly erode any benefits and is a slippery slope into financial disaster. 

I also only use my credit card. I only use my debit card if I am withdrawing cash. This is so I am not ‘double dipping’ and unintentionally increasing my spending ability. Using my credit card for all expenditure also provides protection against theft and fraud that a credit card does not. When leads me to my next benefit of credit cards

The Power of Fraud Protection

One of the most comforting reasons I consider my credit card an asset is its fraud protection advantages. In an era where financial scams are becoming increasingly sophisticated, having a layer of protection is invaluable. Unlike debit cards, which provide direct access to your bank account, credit cards act as a buffer. In the unfortunate event of fraud, credit cards offer insurance and easier recovery options, safeguarding my finances against unauthorized transactions.

Other Financial Benefits. 

Many credit cards come with financial savings such as 2 for 1 cinema deals, allowing you and a friend to enjoy the latest films at the price of one ticket. This can make a significant difference in how often you indulge in movie outings without worrying about the cost. Additionally, dining out becomes cheaper with discounts at restaurants. For those with a penchant for travel, certain credit cards offer complimentary travel insurance when you book your flights using the card, providing peace of mind during your journeys. This insurance often covers unexpected events, ensuring that your travel experiences remain positive and protected. Furthermore, some credit cards even extend benefits to health and fitness by offering gym memberships, encouraging a healthier lifestyle without the added financial strain. 

Each credit card company will have their own offerings so do your research and find one that works best for you. 

Responsible Usage

The foundation of turning a credit card into an asset lies in responsible management. This means:

• Being Vigilant About Spending: Only charge what you can afford to pay off in full each month.

• Being Fully Aware of Terms and Conditions: Understand the fees, interest rates, and benefits your card offers.

• Paying Off the Balance in Full Every Month: This cannot be overstated. It’s the cornerstone of beneficial credit card use.

Conclusion

In conclusion, a credit card can indeed be a significant asset, provided it is used wisely and with intention. Being aware of the risks, taking advantage of the benefits, and maintaining disciplined financial habits are key to ensuring that your credit card serves your financial goals. For those looking to optimize their financial strategy, consider how a mindful approach to credit card use can not only protect you from fraud but also enhance your financial flexibility and security.