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General
This website / application has been prepared by FIL Investment Management (Hong Kong) Limited and for informational purposes only. FIL Investment Management (Hong Kong) Limited, FIL Limited and its subsidiaries are commonly referred to as Fidelity or Fidelity International ("Fidelity"). The information on this website / application is intended for Hong Kong residents and is for reference only. None of the Fidelity products referred to on this website have been approved for sale or purchase by any authority outside Hong Kong. Persons resident in territories other than Hong Kong should consult their professional advisers as to whether they may subscribe for the products and services described in this website / application or whether they require any governmental or other consents or need to observe any formalities to enable them to do so. Certain Fidelity products sold in Asia may be established in Luxembourg. The information contained in this website / application does not constitute a distribution, an offer to buy or sell any securities or the solicitation of any offer to buy or sell any securities, engage the investment management services of Fidelity in any jurisdiction in which the distribution or offer is not authorized or would be contrary to local laws or regulations. Without limitation, the information in this website / application is not for distribution and does not constitute an offer to buy or sell any securities in the United States of America to or for the benefit of United States persons (being residents or citizens of the United States of America or partnerships or corporations organized under the laws of the United States of America). It is the responsibility of the persons who access this website / application to observe all applicable laws and regulations.
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Use of website
Unless otherwise specified, information contained in this website / application does not constitute investment advice or recommendations. Users are solely responsible for determining whether any investment, security or strategy, or any other product or service is appropriate or suitable for them based on their investment objectives and personal and financial situation unless otherwise agreed by FIL Investment Management (Hong Kong) Limited. Any person considering an investment should seek independent advice on the suitability or otherwise of the particular investment. While certain tools available on the website / application may provide general investment or financial analyses based upon your personalized input, such results are for your information purposes only and you should refer to the assumptions and limitations relevant to the use of such tools as set out in this website / application. Users should consult their independent professional advisers should they have any questions. The information contained in this website / application is only accurate on the date such information is published on this website / application.
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Swipe smart!
04 Sep 2024
Credit cards are a double-edged sword. Some think they induce spending of future income and cause one to be mired in debt. However, when used appropriately, credit cards can also be useful wealth management tools. Here are some smart tips to make credit cards work for you:
1. Number of credit cards held
61% of Hong Kong respondents reported being impacted at work due to the stress from debt repayment, the Fidelity Global Sentiment Survey1 reveals. Paying off high-interest credit card debt can make individuals feel overwhelmed. It is advisable to use credit cards wisely to avoid falling into any debt crisis, so how many cards are enough?
As a rule of thumb, two to three credit cards should cover one’s daily needs. Having too many credit cards can be a hassle. As credit card debt has to be repaid monthly, and each card may have a different repayment date, missing payment for a card results in high service charges and interest. If cardholders forget to request a waiver, they are also subject to annual fee payments.
2. Pay off your debt in full and on time
As credit card interest rates can be as high as 30% - 40%, missing or delayed payment of a bill can lead to exorbitant financial expenses and overdue fines, which also affects one’s credit rating.
Obviously, the wise thing to do is to note down the due date on your calendar after receiving your monthly statement. You can also take advantage of autopay services or set an electronic reminder on your phone to avoid missing a payment. To make credit cards work, one needs to be disciplined and pay credit card charges every month. If you lack the funds to do so, pay the outstanding debt as soon as possible since interest arising from delay of payment often gets accumulated and becomes a significant sum of money.
3. Use your credit limit sensibly
The bank determines your credit limit according to your income and credit history. You should spend within your means and use your credit limit sensibly. Request the bank to raise your credit limit only when your income is high enough and your finances are sound.
Credit limit usage should be maintained at 30-35%, as spending higher than this level can cause banks to think you’re in financial trouble, which hurts your credit score. In other words, the less the credit limit is used, the higher is one’s credit score.
Take a credit card with a limit of HK$10,000 as an example. If you spend HK$7,000, then you’ve used 70% of your limit, which could drag down your credit score. However, if you have two credit cards both with credit limitation of HK$10,000, then each with a spending of HK$3,500, limit used on each card is only 35%, which improves your credit score.
4. Get out of debt with a balance transfer programme
Some people may choose to pay their credit card debts with another credit card when they face a shortage of funds. When credit card A is due and required to pay, the cardholder pays with credit card B. Then the dues on credit card B are paid off with credit card C, and so forth. However, the debt remains unpayable and the cardholder continues to owe money.
Balance transfer programmes can be helpful in managing one’s credit card dues since amounts payable against different cards can be consolidated into a loan with a lower interest rate. These programmes generally provide a longer repayment period and a higher loan amount, making them suitable for paying off credit card balances. The repayment period of some programmes can be as long as 72 to 84 months, with an amount equivalent to 18-21 times the monthly salary of the borrower, which is longer and larger than typical individual instalment loans.
1 The Fidelity Global Sentiment Survey 2023’s data collection, research, and analysis in regard to global employees and was completed in partnership with Opinium, a strategic insight agency. Data collection took place in July 2023. The sample consisted of 26,000 respondents with the following qualifying conditions: aged 20–75; either they or their partner were employed full-time or part-time; not all regions were asked about sexual orientation or gender identities (individuals that did not identify as either as male or female did not represent a statistically significant sample size and are not presented within this piece); a minimum household income of: Australia: AUD $45,000 annually; Brazil: BRL $1,501 monthly; Canada: CAD $30,000 annually; China: CNY ¥5,000 monthly; Denmark: DKK Kr.100,000 annually; France: EUR € 20,000 annually; Germany: EUR € 20,000 annually; Hong Kong: HKD $15,000 monthly: India: INR₹55,001 annually; Republic of Ireland: EUR € 20,000 annually; Italy: EUR €15,000 annually; Japan: JPY ¥1.5m annually; Mexico: MXN $4,500 monthly; Netherlands: EUR € 20,000 annually; Saudi Arabia: SARر.س.س4,000 monthly; Singapore: SGD 2,000 monthly; South Korea: KRW₩1.0m monthly; Spain: EUR kr€15,000 annually; Sweden: SEK kr200,000 annually; Switzerland: CHF CHf20,000 annually; United Kingdom: GBP £10,000 annually; United Arab Emirates: AEDإد.إ5,000 monthly; United States: USD $20,000 annually.
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