Credit cards are often vilified and sometimes even feared, but when used responsibly, they can actually be very beneficial to your finances. Many savvy personal finance bloggers are well aware of the positive side of credit card use, but for those who are in debt, these pieces of plastic might seem like the enemy. The truth is that when used correctly, credit cards can have a positive impact. Here are some of the hidden benefits of credit cards:
If you need to build credit from scratch, getting your first credit card is the way to go. You can quickly and easily establish credit by using the card to make small purchases, then paying it off in full every month. Keep that first account open, because it helps to age your credit report, which will boost your score over time.
Tracking Your Spending
One of the first steps to creating a budget and getting your finances in order is to track your spending. This isn’t exactly easy or convenient to do when paying with cash- you have to hold on to receipts, or be very good about jotting things down! When you pay with a credit card, you can see where your money goes without having to hunt down receipts or rack your brain.
Earning Cash Back Bonuses
Some cards offer cash back bonuses that can really add up over time. We currently have a Discover card that gives 5% back on qualifying purchases. For a few months, the bonus was offered every time the card was used at gas stations. So we put all of our gas purchases on there in July, August, and September, and just cashed out over $20. Not bad!
Racking Up Reward Points
This year saw my first foray into earning credit card rewards. I got the Barclay’s World Arrival MasterCard, and so far, we have over $600 in rewards just waiting for us to spend! Ideal for us, since we love to travel. One caveat: you do need to have a good, sometimes great, credit score to qualify for many rewards cards.
Taking Advantage of Special Offers
I always said that I wouldn’t sign up for a store credit card, until I did. There was one big reason why I got a Kohl’s charge, and it wasn’t because I wanted to spend money that we don’t have. It was because I wanted to take advantage of the offers that come along with being a card holder. That particular card brings me as much as 30% off, on top of any sales going on in the store. That means we can save as much as 80- 90% when we shop there! Since they have good sales on clothing, toys, and housewares, we’d have to be silly not to take advantage of the benefits of having a store charge card. In fact, we did most of our holiday shopping there over the summer and saved a ton.
With any card that you apply for, you always want to read the fine print. Check the APR and any annual fees- I personally prefer to avoid annual fees unless the rewards are worthwhile. If you can use credit cards responsibly, you can take advantage of some sweet benefits.
Do you like to use credit cards for the benefits, or do you avoid them?