Credit cards have a bad rap with many people. However, I am here to tell you credit cards can be one of the best financial tools out there, depending how you use them. Here are 4 reasons to get a credit card.
Build Credit History/Score
Credit cards by definition help you build a credit history. Credit history is not just used to open up more credit cards, though. Credit history is also important for loans, such as a mortgage or a car loan. Credit scores, also known as FICO, are based on your credit history. A high FICO means better credit which, in turn, means more favorable loans terms (i.e. lower interest rates). Mortgages can be tough to get approved for, so you’ll want to start building your credit history as soon as possible. In order to ensure a good credit score always make your payments on time.
Reward Points
Many credit cards offer rewards points just for simply spending money. While some credit cards require an annual fee, there are many out there that don’t, making the rewards essentially free money. Use your credit card by spending the same way you would if you were using cash, but you get rewarded for it. Who can pass on that?
Rewards can be used for things like cash back applied to your bill, travel, gift cards and specific items that can be purchased through the credit card’s website. Also, many of the travel points offer more than just their dollar value to be spent. For example, our Chase Sapphire Preferred card offers 1.5 times your points when you book travel. So, $1000 worth of points is equal to $1500 for travel.
Earn Interest
When you using a credit card for your purchases, it allows you to keep your money in the bank longer, therefore earning more interest. My advice is to put most of your money in an online savings account with a high yield and transfer it out once a month to pay your credit card bill. It is important to pay your credit card in full, though, otherwise you owe more interest than you earn.
Make Purchases Online
Credit cards allow you to make purchases online, but cash does not. Of course, debit cards can also be used for online purchases, but see below for why I prefer credit cards over debit cards.
Easy to Track Spending
Using a credit card for all your spending makes it significantly easier to track your spending. When you use cash, you have to make a note of everything you are spending your money on. When you use a credit card for all your purchases, your bill keeps track of all of your spending for you. Debit cards offer this perk, as well, but you will also see deposits and withdrawals making it slightly harder to dig through for all your purchases. Some credit cards also break down your purchases into different categories or you, so you can see where you’re spending most of your money
I always recommend that if you do get a credit card, pay off your bill in full each month. With or without a credit card, you should avoid spending more money than you have at any given moment.
