I remember seeing a Money magazine post appear in my Facebook newsfeed a few weeks back. It had a list of the top few reasons why credit cards are awesome or something along those lines but what really caught my eye was the number of comments. It had so many! I clicked on the comments section and saw nothing but credit card bashing. It was like the credit card was the geekiest kid in school, and “he” was getting jumped by a bunch of haters!
I guess that’s part of the reason I was inspired to write this post. Most of the people hating on cards seemed so misinformed; I would imagine they all experienced horror stories with credit card use. As an avid credit card user, I’d like to break down my reasons for why I think credit cards can be powerful when used responsibly and why they shouldn’t be bashed on!
- Credit cards can help you keep track of a budget. Think about it – if you give yourself a monthly budget for all of your expenditures, you can see how well (or NOT so well!) you stayed on course using your monthly credit card statement and online banking tools to track your financial activity. If you find yourself going over budget, you can adjust your spending accordingly. The key to good credit card use is to not use your card’s credit line as a loan for something you otherwise wouldn’t be able to afford. Since most credit cards have ridiculously high interest rates, it’s in your best interest to only use it up to a balance that you know you’ll be able to pay in FULL every month.
- Credit card perks are awesome! Assuming you’re following the first tip and paying off your balance in full every month, you’re essentially getting paid BY your credit card company to buy the things you’d normally be buying anyway. For example, I use my cash back credit cards to pay for practically everything. I always pay off my balance in full every month, so at the end of the month I get charged no interest (win!), and I increase my cash back bonus. If you’re spending $1000 a month on items and using a 1% cash back card, that’s $10 you’re getting paid per month and $120 per year just from buying things you were going to buy anyway.
- Credit cards help you build credit. If you use your credit cards responsibly, you can build a great and long payment history. The keys here are managing your credit card utilization rate, making payments on time every month, and keeping derogatory marks to a minimum. The truth is, most people need a good credit history because one day they’ll most likely need to borrow money to buy a big-ticket item (i.e. a house, a car, etc.). Without good credit, it’s just not financially responsible to buy any of those things because borrowing rates will be too high, which could cost you more in the long run!
There are other reasons I can think of as to why credit cards are great, but these are the big three I can think of. One day I’ll have to write a post about credit score factors!
Have other reasons why you love credit cards? Any reasons why you hate them? Comment below!