Personal Finance

Credit or Debit? That has been the question in light of developments in debit cards and increasing interest rates for credit cards. Personally, I would recommend using debit cards for individuals who are big spenders and dislike making lump sum payments and credit cards for those who can keep track of their spending activities and are able to payoff their loans on time. For those who are in the habit of paying off their credit every month, it is recommended to treat your credit card as if it was a debit card since you can use your transactions to gain either reward points or cashback depending on the card.

Interest rates and debt would not be an issue for these types of consumers unlike those who tend to just make the minimum monthly payments and become in debt for life. Originally credit card companies used cashback and rewards to lure consumers into joining and later getting them into their debt through monthly payments. However, consumers are getting smarter and are now able to both gain their promised rewards and remain debt-free, forcing companies to either cancel their reward programmes or reduce the amount of benefits.

Now this brings me to some bad news as I have learned Citi Dividends will be cutting back their cashback to just 2% now from the 5% that got me to join in the first place. In addition, I learned that American Express Blue will only provide cashback checks after accumulating at least $6.5K worth of spending (this seems impossible as I am not a big spender). On the other hand Visa Rewards uses a point system that makes you think you would be better off buying the item instead of accumulating Visa Points for it. Oddly enough, Visa now allows for Debit Cards to be eligible to enroll in their reward programme. On another note, I learned that it is generally better to have an inactive, open credit account instead of closing them since that will leave a poor record on the credit report and hamper one’s FICO score. Also, it is generally recommended to have at least one VISA, one MastarCard and one AmericanExpress if possible but don’t bother with Discover, Diners’ Club or JCB.

An excellent programme to easily track one’s net worth and transactions is www.yodlee.com, which aggregates all your available assets and liabilities into one user-friendly interface. From this website, I was able to figure out my spending patterns, net worth, transaction history and figured out how to properly budget for the next two months. It also consolidates news feeds, emails as well.

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