*Disclaimer: I wrote this post looking at the ideal and what works for me. I had a comment on the Moola Mind Facebook Page from a lady who had been caught in the credit card trap. Heed the caution below. Many simply do not have the control to take advantage, others might. If you don’t have enough control… then you’re best to stay away. For everyone else, enjoy.
If you don’t have or haven’t had a credit card by now you might still be trading beads and corn… but seriously, most everyone has a credit card. If you don’t, you should. Here’s why.
We all buy items every day, so why not benefit from it? If you’re paying cash, or your just using your debit card, you might be missing out on extra cash, free airline tickets, or a large number of other items. Almost every card has benefits. You have dozens of options from cash back, to airline miles, to points that can purchase items, gift cards, etc.
I like to use 3 cards. One gives me 3% cash back at the gas station. Another gives me 5% back on office supplies, and another gives me 1% back on everything else. I certainly don’t organize my purchases to the fullest to maximize the benefits, but for the little effort I put in, the rewards are great. The more energy you spend, the better it can be.
Some cards have sign up offers that can reward you hundreds of dollars. A few months ago I took advantage of an offer that gave me 50,000 bonus points, which means a $500 check, or even more towards airline tickets and other offers.
I left something out when I wrote about my DirecTV experience, and that was the extra $19.99 fee that was inaccurately charged to my card. When I tried to resolve it, they had no record of my account, and therefore no record of the charge. They wanted me to walk through a bunch of hoops to get my money back. Big hassle.
So I simply went to my credit card company and they reversed the charge. Now DirecTV has to deal with it, not me!
Each card has added benefits, but most have buyer protection.
If you don’t have credit, then you this is the place to start. You need to get started, and a credit card is a great way to build credit without actually borrowing money (assuming you pay it off every month). By using the revolving credit card and paying it off, you are on your way to building good credit.
This may be a little less conventional, and I don’t want this to be the answer to your spending problems, but for me, its nice to know I have 30 or 40 grand as a cushion for hard times. Like I say, this is the extreme, but as someone self-employed with sporadic income, its nice to know I have a little cushion.
Pay Your Full Balance
Credit Cards represent money that is not yours quite yet, and will be paid with future dollars (and more of them). Here is my caution: Don’t get caught spending money you don’t have. It will cost you future dollars at a greater expense!
This leads me to my simple/obvious tip: Pay your credit card balance off in full!
I highly recommend setting your credit card payment to be automatically paid for in full and withdrawn from your bank account every month. Don’t think about it, just do it. Making the decision every month to pay off your card means that every month you have to make a difficult decision that could make you slip. Pay it off in full, and don’t think about it.
So if you aren’t using a credit card, get one… or two or three. You’re spending money anyways, so get the most out of it.