Credit cards have gained a bad reputation, because of the vast amount of credit card debt that many people accumulate. The truth is that credit cards can be a very valuable asset for most people, and when used correctly, can be a great way to gain wealth and avoid excessive debt.
However, most people do not know how to use their credit card properly, not only to avoid debt, but also to better your financially standing. Here are a few tips to help you understand when it is a good idea to use your credit card, and when you should avoid it.
To get the rewards
It hard to deny the vast amount of rewards systems that all credit card companies have available now. You can reap the rewards that these companies promise too, if you know how to get them. Study the rewards system that your credit card offers. Make sure that you are doing everything you can do to be eligible for the rewards that you want to get. Many people will use their credit card for certain purchases, such as plane tickets or gas, only to get the best use from their rewards program.
To build your credit
“Using a credit card is still a great way to build credit, if you know how to manage it correctly,” says Jeffrey Weber of SmartBalanceTransfers.com.
Many people do not know how to use a credit card correctly in order to build credit and improve your credit score. You need to remember to pay off your credit card to avoid going into debt or acquiring interest, but you also need to wait until the end of each billing cycle to do so. Check with your credit card provider for any other stipulations. It is a slow, but effective way to build your credit and improve your financial standing over time.
To make purchases online
In order to protect your identity and financial information, it is always safer and smarter to use your credit card for online purchases instead of your debit card or other electronic payment. Most credit card companies will alert you if they notice any suspicious activity on your credit card and even stop unauthorized purchases, but you can also stop or cancel and report purchases that you didn’t make as soon as you see them on your online statement. This can save you money and protect your identity.
To have an emergency fund
The best scenario would to have a cash emergency fund that will support you and cover all your expenses for 3 months on had in case of emergencies, but that is not always practical or realistic for some people. You can have a credit card on had that you don’t normally use to give you a little peace of mind if an emergency does occur. Try to keep this credit card in a safe place away from your other sources of cash. This way, you will always have a financial back-up.