Thursday, September 27, 2007

Plastic card that brings happiness, changes lifestyle

Like or not, the credit card has become an indispensable part of urban life. Plastic money can indeed be a supportive tool in today's life of comfort. It bring happiness to those who like shopping as they can pay the bills over several months. "I just charged it and went home with a new laptop," Ira Lestari, an entrepreneur, told The Jakarta Post.

"Particularly for those who like traveling, having a credit card can be so helpful. It is very convenient since you don't have to carry much cash to a place where you are a stranger," she added. "And when you need more cash, a credit card's cash advance service enables holders to withdraw money at any major ATM worldwide."

Furthermore, many restaurants offer significant discounts to credit cardholders. And the credit card automated billing program enables you to avoid standing in long lines to pay utility bills. In addition, purchasing merchandise, booking airline tickets or hotel rooms online is just a matter of tapping away at a computer keyboard at your convenience.

Indeed, this 8.5 by 5.5 cm card can be a great financial help if a person can make use of it wisely. Not only does it facilitate making purchases when cash is not on hand, but also allows people to delay payment for 30 days or more with no interest depending on the terms and conditions set by the credit card issuer. "As long as you don't bite off more than you can chew, a credit card is really helpful," Ira continued.

It means that a credit card should be seen as a basic need rather than a luxury. Otherwise, "If we are unable to pay for the expensive goods or services we buy, it is not unthinkable that the interest will end up costing more than the actual product purchased," Ferry Hartono (not his real name), a government official who chooses not to have a credit card, asserted. A credit card is nothing but a clever deception, Ferry continued. "Despite all the advantages, no credit card gives you free money. The interest rate is simply a sly way to take your money."

Whether you agree with Ira's or Ferry's sentiments, the fact that the increasing number of credit cards being offered to the public by many financial institutions is an interesting phenomenon. Tight competition between credit card companies gives cardholders more attractive incentives such as reward points, cash back, education and health services.

American Express (AMEX) Card Services of Bank Danamon Indonesia introduced September last year its latest membership rewards program, in which AMEX cardholders can redeem their reward points with hundreds of reward items such as a round trip to Singapore with 38 airlines, fashion merchandise and other exclusive items.

The reward program offers up to five times bonus points to its members at participating merchants. "That way our privileged members can earn points faster and enjoy their rewards sooner," Darwin Tan, senior vice president for AMEX Card Business Head, explained to The Jakarta Post. The company collaborates with a number of premium multi-industry business partners such as Harley-Davidson and Nokia, "AMEX card members now can redeem their reward points for either a Harley-Davidson motorcycle or a Nokia E-90 Communicator," he added.

In addition to reward points, credit cardholders now can enjoy the cash back program. HSBC Visa and MasterCard, for instance, offer up to Rp 800,000 in a cash back reward upon approval of an application. This promotion is valid until Oct. 31 this year.

GE Money, in cooperation with Kartu Belanja Carrefour, Smart Shopping Cash and Manulife Gold Card, also offers an array of benefits to cardholders, such as education and health services. GE Money credit cards offer convenient tuition fee payment arrangements from kindergarten to university level. "And GE money credit card facilitates easy access to health services at participating hospitals," GE Money CEO, Harry Sasongko, told Kompas.

However, all the attractive incentives are no more than a marketing approach by credit card companies. Many cardholders admit that such incentives were one of the reasons they applied for a credit card. Interestingly, quite a number of cardholders have become trapped by unrestrained use of their credit card. Obviously they find it easier to spend that to manage their finances.

Unless a person earns a steady income, they should put on hold any plan to get a credit card. Moreover, timely financial management is crucial for those with plastic money. Eko B. Supriyanto, director at the InfoBank Research and Bureau, advised that a credit cardholder should not charge more than 30 percent of his or her monthly income to their card in any given month. "Otherwise, a problem will gradually emerge, especially when they have to pay off other debts like car or mortgage payments," Eko was quoted by Kompas as saying.

A credit card, thus, should not be treated as an instrument to incur debt. Rather, it should be used as a convenient tool to make a transaction. (Aulia Rachmat)

The Jakarta Post
September 28, 2007

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