Finance
CREDIT CARDS: FRIEND OR FOE?
By Aaron Crotty
W
hen it comes to credit
card usage, people can
often misconstrue this as
a negative thing. A lot of
people use a credit card as a short-term
loan, which can have a snowball effect
due to high interest rates on repayments.
However, this month’s article is not
about the ills of using or misusing credit
cards, rather it is to outline the positive
benefits of credit card use.
Insurance
Almost every credit card provider will
offer worldwide protection against
fraudulent activity on a credit card. The
reason for this is that technically, the
provider is lending to the consumer
against an agreed limit, should there
be any fraudulent activity the loss will
be attributed to the provider itself.
Therefore, the provider will act very
swiftly to stop any further fraudulent
activity, as well as, working at recouping
the loss as soon as possible. Unlike
bank account fraud, the funds lost are
technically not owned by the consumer.
This makes the fraud less of an
inconvenience.
A great case study I refer to from
experience is protection against travel.
For example, gone are the days when
you would take a trip to a travel agent
to book a flight. Today we find it, much
more convenient to book online. This
is now the most popular way to plan
a vacation, book a flight or even a
stay at a hotel. With so many low cost
online providers trying to undercut each
other for competitive prices, should
a company of your choice fall into
liquidation, you would be fully insured
against the looming potential loss, by
having booked through your credit
card. If you had booked using a debit
card, then you would risk suffering
the complete loss, unless additional
assurance was bought.
Universal Acceptance
Certain purchases are difficult to make
with a debit card. When you want to
rent a car or stay in a hotel room, you’ll
almost certainly have an easier time
if you have a credit card. Rental car
companies and hotels want customers
to pay with credit cards because it can
be easier to protect themselves against
customers for any damage they cause
to a room or a car. So if you want to pay
for one of these items with a debit card,
the company may insist on putting a
hold of several hundred dollars on your
account. Also, when you’re travelling in a
foreign country, merchants won’t always
accept your debit card as payment, even
when it has a major bank logo on it.
Incentives
Most providers will offer an incentive for
certain levels of usage; this could come
in the form of ‘cash back’, air miles or
loyalty points.
I personally use the Emirates NBD
skywards card for the bulk of my
transactions, with this, each month I
accumulate a certain level of air miles
which I can use at any time. This is a
great incentive for an expatriate. Please
note, in the small print of the terms &
conditions from any provider, they will
outline that any incentive or bonus’
provided are subject to no default
payments on your monthly bill.
Building Credit
If you have no credit or are trying to
improve your credit score, using a credit
card responsibly will help your credit
score. This is due to the fact that credit
card companies will report your payment
activity to the credit bureaus. Debit card
use doesn’t appear anywhere on your
credit report, so it cannot help you build
or improve your