When used properly, credit cards can be a great financial tool. When misused, the plastic can be a financial disaster. This article will give you the pros and cons of using credit cards and a few helpful tips as well.
Many credit cards are in the category of “Rewards Credit Cards.” These cards offer cash back, airline miles, gift cards, etc., as an incentive to use that particular card. As long as you use your card responsibly, you can rack up free stuff while buying stuff that you would buy no matter what. Many cards offer extra rewards for using your card on everyday items like gas, groceries, and other necessities
Using a credit card allows you more time to pay for something. If you don’t have any money in your checking account but will next week, you can use your credit card to cover the lapse in cash flow.
Boosted Credit Score
Your credit score will benefit from having a credit card that is paid in full every month. Having a better credit score means that you will get better interest rates on later, larger purchases likes homes and cars.
I use an REI Visa and they offered a $100 gift card just for signing up and using my card once. It came in the mail about a week after my first use. Many retail stores have their own branded cards with awesome bonuses.
Credit cards have very high interest rates and if you don’t pay off your statement balance, you will be charged that horrendous rate. You will need to avoid paying any interest on your credit card to make it worthwhile. If you do happen to incur a balance that you can’t pay off immediately, pay off as much as possible.
Many credit cards have annual fees and other fees associated with various transactions including late fees and balance transfers. There are many options for cards with minimal or no fees so search for one of those.
Ease of Use
Using a credit card might not feel like you are using “real money.” Use of a card instead of using cash or a checking account might make it much easier to spend money.
Credit cards can be useful tools in building your credit score and earning rewards on the hard earned dollars that you spend. As long as you use credit cards responsibly, credit cards are great. If used improperly, credit cards can get you into a lot of financial trouble.