Safer Way Using Credit Card

We often confuse when the credit card bill is over limit and may threaten the other cash flows.

First of all, never let the outstanding credit card bill increases! Just pay off the bill right now and keep it at zero balance! Never try to obtain any more finance to pay off the bill!

Secondly, our fortnightly or monthly income should consistently be arranged in priority order for:

• Basic living costs: mortgage installments or rent payments, meals, electricity & water, telephone, clothing, health.
• Risk management: emergency fund in call deposit, house & content insurance, health & medical insurance, life insurance, car insurance.
• Retirement planning and/or time deposits and/or financial market investments.
• Happy family expenses: dinner out, shopping, movie, holiday, travel.
• Capital investments: child education, property, gold, business investment.
• Share with the world in donation or charity.
• Life style assets: cars, boats, antiques, etc.

Thirdly, setting emergency fund in call deposit needs to be related to the credit card limit.

• Credit card limit = approximately 50% of call deposit balance
• The limit is set in flexible cap as arranged with bank.
• In normal condition, the limit is set at minimum limit to avoid the risk of fraud or for self spending control.
• When needed, for example: overseas travel, entertain client, family event, call the bank 24/7 to negotiate a temporary limit increase against the balance of the call deposit.
• Then after use, pay off with the call deposit and decrease the limit again straightaway.

That’s, in my opinion, the safer way using credit card.

In conclusion, credit card is only for emergency.