When it comes to financial advice, an unfair share of blame is often heaped upon credit cards. Yes, paying with plastic carries some temptation to overspend. And yes, those who get carried away often find themselves trapped in a cycle of mounting interest and endless payments. But credit cards aren’t all bad! Used correctly, credit cards can actually help you get your finances into better shape.
Cash back bonuses can be valuable benefits. Many cards offer cash back bonuses, usually ranging from one to five percent. If you use your card to pay all of your bills, plus purchase gas and groceries, your cash back bonuses can really add up. At the end of the year, you can apply that money toward a special purchase, or request a check that you deposit straight into your savings account.
Just remember: If you don’t pay off balances at the end of each month, the accumulating interest negates any cash back benefits.
Fraud protection can mitigate potential disaster. Most credit card companies take fraud protection seriously. You usually won’t have to pay for fraudulent purchases if you report them in a timely manner, making credit cards preferable to debit cards which often don’t offer the same benefits. With debit cards, your entire bank account could be drained before you even realize your card is missing.
Credit cards can help you budget. Simply log into your account, and tracking your spending is easy. Download your card company’s app to your smartphone, and you can check in on your budget daily.
Credit cards build your credit history. Manage your credit cards wisely, and a boosted credit score will be your reward. You will be able to qualify for a better mortgage with a lower interest rate, get a better car loan, and access other benefits associated with a premium credit score.
Just remember, credit card interest is calculated on a revolving basis. So, if you don’t pay off balances each month, you could be trapping yourself with debt.
At your next appointment, let’s discuss smart budgeting and spending strategies, so that you can free up more of your money for long-term goals.