Until recently I was leery about having a credit card. I had a friend who got into serious debt when she was issued a credit card right out of high school. It’s every girl’s dream to hit the mall and be able to buy anything that catches her eye. At least until the statement comes at the end of the month and it’s time to face the music.
Credit cards aren’t all bad though. In fact, when used carefully, they can benefit you in several ways. But first let’s look at some of the ways that a credit card can get you into trouble.
You Don’t Read the Fine Print
A lot of cards come with hidden fees that they don’t advertise. Be wary when applying for credit cards and make sure you won’t be hit with unexpected charges.
Minimum Payments
You’ll end up paying more interest than the original purchase cost if you go this route. Pay off cards aggressively.
Maxing Out Your Card
Carrying too much debt on your card can impact your credit scores negatively. Try not to use more than 30% of your available credit to avoid this pitfall.
Identity Theft
Scammers and identity thieves are becoming more savvy every day. Every time you use your credit card you put yourself at risk of having your credit card number stolen. By the time you get your statement at the end of the month you could find thousands of dollars charged and be left to clean up the mess.
It’s Borrowed Money
It’s easy to buy things you can’t afford when you have a credit card. Remember, it’s not really your money.
Now let’s look at why having a credit card can be a great financial tool:
Build Credit
Paying off your credit card statements in full every month can help build or repair your credit score.
Emergency Fund
Everyone should try to build up a cushion in case of an unexpected crisis. A credit card can act as that fund as long as you have the means to pay the bill off ASAP.
Rewards Programs
With incentives like cash back or frequent flier miles, it makes sense to pay your bills with a rewards card. Just don’t overspend in order to earn more perks.
Easier Returns
In some cases you’ll find it’s easier to obtain refunds on purchases when you can present a credit card statement.
