Two Faces of the Contemporary Economic Life
How to use credit cards wisely
any collateral. Not using them, however, is not really an option.
Successful financial investment does not equate to abstaining from spending. It involves the wise use of money. Credit cards, too, require wise use.
Six ways of reducing the use of credit cards We are living in the era of credit. Everyone has two or three credit cards in their wallet. However, indiscriminate use can lead to a major failure. It is best to use a single card suited to one's major needs, for example, one that offers discounts at movie theaters or gas stations. If you hold the credit cards of companies that you haven’t dealt with in the past, they might offer overlapping benefits and make you simply spend more.
In addition, you should identify your spending patterns to make sure it is reasonable. To this end, you need to gather your monthly credit card bills, list the items by spending categories such as living or transportation expenses, and then check how much you have spent on each. Most monthly payments are due in the middle of the month, on the 10th or 15th.
If you set it instead at the end of the month, you can identify your spending patterns from the first to the last day of the month and manage better your overall monthly payment. Once you have analyzed your spending pattern, you have to make efforts to reduce spending on categories that have low personal value (coffee, alcohol, etc) and shift that spending to more valuable areas.
Your budget for food or shopping should be roughly set in the beginning of the month, and you should make an effort to meet that budget as much as possible. This helps reduce impulsive consumption. Impulsive purchases may bring you momentary joy, but also long-time regret.
Limits for cash advances and installment payment plans should be set at an appropriate level to prevent excessive consumption. You can even disallow delayed installment-based payments or cash advances. Above all, the most important point is to increase your savings. If you make a bank account for seed money, you can largely reduce spending by setting your own saving goal that way.
You should always sign your card to help prevent others from using it. If you haven’t signed your card and you lose it and someone else uses it, you may not be able to recover that money. When using a credit card, some the money spent is saved up as points. These points can be used just like cash. You should check the expiration date of those points and use them before then.
Finally, avoid the sweet temptation of revolving payments. Revolving payments allow you to pay only the amount of money you have when paying the credit card bill, and delay the payment of the rest amount. However, once you know the interest rate of this service, you will easily realize why you shouldn’t do it. It may be better than delaying the entire
payment, but the frequent use of this service and its sweet temptation is dangerous to your finances.
The advantage of credit cards is that they provide more benefits than check cards. They have higher discount rates and allow long-term no-interest installment plans. Consumers are naturally attracted to them. However, the indiscreet use of credit cards can lead to debts and lower your credit rating. This is why you need to spend reasonably with a plan in mind.
In fact, check cards have fewer benefits than credit cards. However, if you are not good at controlling your spending, check cards might be better than credit cards. Nowadays, tax deductions for check cards are increasing, and their discount and point services are also gradually increasing. This has resulted in increases in check card users. Moreover, as payment with a check card is only possible when there money in your bank account, it makes for a healthy consumption pattern.
The income deduction for credit cards at the year-end tax adjustment is of great interest to office workers. This year, the income deduction rate for credit cards was 15% and for check cards was 30%. In the original tax law revision proposal, an increase in the deduction limit up to 5 million won had been included. However, when the actual law was introduced, it did not pass the National Assembly.
Therefore, the income deduction limit for credit cards is the same as before, 3 million won.
Those who spend 25% or more of their total annual salary using credit cards or other means can take the income tax deduction. The income deduction is not applied to those who spend less than 25% of their annual salary regardless of how they spent it. However, once the amount spent using credit cards begins to exceed 25% of your annual salary, you should use check cards instead. The income deduction for check cards is more advantageous. If the amount spent by credit cards accounts for more than 25% of your annual salary, it will likely be a burden on your household budget. Therefore, using check cards and spending the money in your bank accounts is more beneficial than credit cards in terms of financial management.
