When Using a Credit Card Makes Sense
Learn These Need-to-Know Points So You Get the Most Out of Using a Credit Card
We're all faced at some point with the choice of getting a credit card. Regular maintenance, a smart approach and a plan to stay within budget can make them a beneficial choice. Consider these points:
Paying It Off
The most sensible action you can take is to pay off your entire credit card balance every month. If you can't, you aren't living within your means and are accruing unnecessary finance charges. Keep track of how much you spend so you don't overextend yourself. A budget will help you stay on course.
Swiping is Quick and Easy
To pay for purchases, it's easy to swipe your card and not have to carry lots of cash or your checkbook. And if you use your credit card for most purchases that eliminates the need to balance your checkbook more than once a month. As long as you track your credit card spending (and don't touch your checking account), your checking account funds will be available to pay your monthly credit card bill.
Knowing the Credit Card
When you understand the fine print of a particular credit card and feel comfortable with the terms, you are then ready to apply. Finding out what affects your interest rate, how long an introductory rate lasts and what a late payment can do, in addition to others points, is a credit wise approach to money management. Visit the credit learning center at credit.com for more tips.
Every month you pay your credit card bill on time, you build your credit history and improve your credit score. Careful management of your credit will help you get a competitive interest rate, especially when making large purchases (auto, real estate).
With theft and fraudulent charges a possibility, you have certain protections from your credit card provider, plus, unlike with a debit card, no money immediately leaves your checking account.
Using Grace Periods
Between the time you make a credit card purchase to when you pay the bill, you get a grace period typically between 20 and 30 days. Grace periods give you the opportunity to use your credit card as an ultra-short but interest-free loan. Remember: grace periods are only advantageous when you pay the entire balance monthly to avoid finance charges.
Ringing in the Rewards
Many credit cards offer some kind of rewards program, giving you a percentage back for every dollar spent in the form of cash, gift certificates, travel, etc. It's not prudent to use a credit card just to earn rewards, yet rewards are a feature you don't get with cash or many debit cards. Be careful not to spend more than you would with cash, just to add to the rewards. Some rewards cards carry annual fees, so make sure it doesn't cost you more than the rewards you receive.
Traveling Made Easier
When booking a hotel room, the hotel can tie up available cash in your checking account for some time when you provide them with a debit card. These holds could be avoided with a credit card. The same holds true for renting a car.
Transferring Your Balance
Debt consolidation makes sense when the credit card you're transferring your balance to has a lower rate than your current one(s). Read every clause, guideline and rule so as to eliminate the possibility of any hidden fees or tricks with the transfer.
Having an Emergency Fund
When emergency funds in your savings account are tapped out or not immediately accessible, a credit card can be a lifesaver. As always, pay the entire credit card balance monthly and then replenish your savings account.
Credit cards have many convenient advantages. Use your best judgment and you'll likely reap their benefits.