Why You Should Use Credit Cards
Depending on how you grew up, Credit Cards may be something you embrace or avoid. In our family, we embrace the credit cards, but we avoid the debt. Credit Cards are great for earning points, getting special offers, getting special perks, and using another level of production from someone hacking your bank account. Credit Cards are not good for you if you spend outside of your means. I’m going to break down some of the perks and negatives of credit cards and give you guidance on to use them.
GOLDEN RULE TO USING CREDIT CARDS
Before we get started, here is my GOLDEN RULE rule to Credit Cards. Don’t spend money on what you can’t afford. Your credit cards need to be paid off every paycheck. 100% No remaining balance. Do not let them get one penny of interest from you.
Every time you make a purchase, you can earn a point (usually)for each dollar you spend. Sometimes, special categories like Travel, Food, Gas, etc. earns you 2x or 3x the points for each dollar you spend. Most Credit Card companies equate those points into a penny for each point. Now that may not seem like a lot but if you think about it; you were going to spend that money anyways. Why not receive money back for your purchases? When you first sign up for a credit card, they may have a bonus for spending x amount of money in a timeframe. If you were going to spend that money anyways, you can get a few hundred bucks back for nothing.
I get special offer emails all the time from my credit card companies. These are emails letting you know of who they partnered with and what kind of discounts you can get. We use Starbucks a lot at my house, our chase card sometimes offers an additional 5% off. Again, we had already planned on going there. Why not receive some small credit back to us?
There are plenty of Credit Cards aligned with travel companies, restaurants, specialty stores etc. who get you additional access to premier places for free. When I traveled a lot for work, I had a Travel Credit Card that gave me access to Airport Lounges. This was a great way to travel as they had free food, free drinks (some beer and wells) and WIFI available. That card alone saved me in a few cases where my plane had delayed hours.
Protecting Your Bank Account
This is the most important to me. When someone steals your Credit Card information, they may charge a few items and you can dispute them and you won’t have to pay them. Most credit card companies expect your card to get stolen and they rather just cancel the card and send you a new one. When your debit card gets stolen, they are taking cash straight from your account and sometimes it can take a bank a few days to weeks to get your money returned. If you don’t have your emergency fund that can be super scary when your bills come due.
Building Your Credit
You can build your credit through using credit cards. They provide an advantage of giving you credit history. Credit history shows potential lenders your ability to pay off the debt you accrued (because we are paying them off every payday.) It is also improves your credit score by showing that you can be trusted with credit. For example, you have a card that says you can use up to $10,000 dollars, but since you pay it off, you never carry a balance more than $1500. You now show that you can be responsible and not max out the credit you’ve been given.
The only negative to a credit card is not paying off the credit card every paycheck. Make sure you have the discipline to go to your credit cards website and pay it off.
I will note, it is not wise to open a credit card when you are purchasing a home. You don’t want to rock the boat with your lender who is reviewing your credit.
You should use Credit Cards to make purchases you had already had planned to make. You should not use Credit Cards to get yourself into debt. Rember the Golden Rule of using Credit Cards; Stay within your means. Take advantage of what the credit cards give you for your everyday spending.