If you read a lot of articles about personal finances, you’ve likely seen many that recommend against credit cards. They act like credit cards are the enemy and cause people to go into debt. Credit cards are neutral at the beginning and whether they become good or bad depends on who is using them and how they use them.
If used correctly, a Credit Card can be a great way to have purchasing power, build good credit, and even offer rewards, as long as they are used responsibly.
A credit card is also an important part of daily life, as it is necessary for many services. Have you tried to rent a hotel or car lately? They all want you to put a credit card on file before they let you sign up.
So, instead of thinking credit cards are a bad thing, you need to learn to use credit cards properly, pay your credit card bills on time, avoid credit card debt and don’t make the mistakes that can lead to bad credit.
Use credit cards responsibly – Just because you have been approved for a credit card doesn’t mean you should rush out on a shopping spree and spend as much as you can. That’s a path to overwhelming credit card debt. You should use a credit card as if you were shopping with cash. Make intelligent purchasing decisions and have a realistic plan in mind of how you are going to pay it off at the end of the month.
Make payments on time – When those credit card bills come in, they need to be paid. Making your credit card payments on time is one of the most important things you can do to protect your good credit. If you miss a payment not only will you be hit with a finance charge, but you will also likely have your interest rate increased, and the credit card company will report to the credit bureau that you did not pay on time. That can negatively affect your credit rating.
Take advantage of rewards – If you are going to use credit cards instead of cash, you should try to get something back for your usage. Many credit card companies offer rewards programs. From airline miles and cash back to gas rebates there are a number of perks that are being offered on credit cards these days. Before you jump on the rewards card bandwagon, make sure you know how much the card will cost (many have annual fees) and that you will be getting more in rewards from the card than you are paying in fees.