Published by Taylor Financial Group
Credit cards have, in recent times, gained a strangely negative connotation. There are still many people who refuse to open up a credit card because they “do not want to spend too much.” Although it is true that having access to a seemingly endless amount of money can make spending easier (and more dangerous), having a credit card can also provide some significant benefits. Let us take a moment to provide some insight on how to take full advantage of credit cards and what they have to offer.
Credit cards provide immediate access to cash you may not have. In short, credit cards are a great option to use as a bridge to pay current expenses with future dollars. But, you should try to avoid using a credit card to spend money that you don’t actually have. It’s important to remember that, if you cannot pay your balance after 30 days, you will begin accruing interest at a considerably high rate (possibly, up to 20% annually!). The American Express card is a good option because they strongly discourage carrying a balance by implementing very high interest on carried balances. However, this would be a very bad option if you are not certain that you will always be able to pay your balance in full.
Interest Free Loans and Promotional Periods
A great benefit of some credit cards is that they offer interest free loans, typically for up to 15 months. Credit card promotions will sometimes offer a “no interest period” on all purchases for new accounts, while other credit cards may offer no interest on balance transfers. This is quite convenient if you have a big purchase coming up that you want to pay off slowly rather than all at once. The one thing to keep in mind is that they don’t always offer the “no interest” option on both purchases and balance transfers. So, be sure to take advantage of the interest free promotion, but don’t accrue interest with other credit card usage. A great credit card offering the “no interest” option is the Discover-it Card, which offers 0% interest for 14 months on purchases and balance transfers. Not to mention its other benefits, which include no annual fee and 5% cash back in various categories.
Points and Cashback
Speaking of cash back, the most impactful, no-brainer reason you should try to use a credit card is that almost all credit card companies, at this point, offer some type of points or cashback system. Not using a credit card to make your everyday purchases can actually be a disadvantage because you are missing out on the points and cashback offers. For instance, if you purchase $5,000 of groceries throughout the year, with a 5% cash back offer, you will get back $250 just because you used your credit card instead of cash or a debit card. Consider this across all of your expenses and the value of using a credit card can really start to add up.
You can also earn an exuberant amount of points (which can be used as cash) with some credit cards, which can be used for travel arrangements and other categories, depending on the card. One of the best credit cards out there right now for points is the Chase Sapphire card. They make it fairly easy, for instance, by offering a promotion of 50,000 bonus points if you spend $4,000 on purchases within 3 months of opening your account. Converted into cash, that’s $625 you can use toward travel arrangements if you redeem through their rewards program, Chase Ultimate Rewards.
Credit Card Fees
Sometimes, life pulls us in many directions. Between careers, housework, family time, and some well-deserved time off, the daily grind can sometimes cause us to overlook some important things – like paying our credit card bill. Before you know it, you open your credit card bill and realize you forgot to pay on time… you’ve been slapped with a penalty fee, or an interest rate increase, or worse – both! Ouch! But don’t fret just yet. It’s easier than you think to resolve some of the consequences of a late payment.
A recent study by www.creditcards.com revealed that a whopping 87% of cardholders who simply asked to have a late fee removed succeeded. In addition, an impressive 69% of people who requested a lower interest rate on their credit cards also succeeded. Overall, most people have accomplished what they were looking for by simply contacting their credit card issuer, including even getting a credit limit increase. In fact, if you are looking to open a new credit card, you may want to consider inquiring about a credit limit increase instead. A limit increase could help boost your credit card utilization rate, which is an important factor in improving your credit score. For more tips on improving your credit score, check out www.creditkarma.com, which provides excellent tips for credit improvement and maintenance, as well as tools to help you monitor your credit.
Credit cards don’t have to be the enemy! If used wisely, they can play a major role in helping you budget, make unexpected purchases or large planned purchases, receive “free” money through cash back and points programs, and even improve your credit score. If you can trust yourself to exhibit some discipline, you should definitely take advantage of the many benefits a credit card can offer.
As always, contact us with any questions you might have. We are here to help!
Sources: Make This Call To Cut Your Credit-Card Fees, Barron’s, by Emily Bary, March 28, 2017
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Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.