TOP 5 BENEFITS to HAVING a CREDIT CARD
• Paying on time helps you build or rebuild your credit- If you haven’t had great credit in the past or have very little credit history this can be a huge thing for your credit score. Paying anything on time that reports to the credit bureaus will always a boost in the positive direction.
• You can spread out payments for large purchases- If you have decided to buy the newest smart TV, furniture, a fridge or washer and dryer then you want it now. With the major credit cards you are able to take those payments and spread them out over time.
• A lot of cards offer rewards, benefits and/or incentives- If you get a card for an airline then you are probably getting percentages off of your tickets or are able to built up your points to free flights. If you get a card for a well known theme park, you are probably to experience new rides before the rest of the public and possibly money off of your theme park tickets. Even well known stores have discounts for their products and possibly gas or other businesses connected to theirs.
• It can be there as an emergency payment situation- If you’ve gotten to the end of your month and you’ve run out of money you know how difficult that can be. What if you forgot to stock the fridge prior to being out of cash? Or, what if your car has a problem that your insurance needs you to pay and they’ll pay you back? Or, your A/C goes out and it’s the middle of summer? That credit card that you keep around and barely use is going to come in to the situation perfectly because you now have the opportunity to pay for your emergency even though you were out of usable cash for the month.
• Having a credit card can help you to loans and other offers- Just like your credit card payment history will help to build or rebuild your credit, it will also give you the chance for other things. When you get a job, there is a possibility that they will check your credit. To get a car unless you are paying for it 100% in cash they will check your check. Moving in to a new place or opening an account, your credit gets checked. That positive payment history can help you get a home, personal or car loan.
TOP 5 THINGS to WATCH OUT FOR WITH a CREDIT CARD
• Overspending- A lot of people aren’t aware of their spending habits until they have the opportunity to freely buy what they want at any time. When you have cash on hand you are dealing with a set amount that you can use. When a person has a debit card a lot of times they’ll do the math on what they can and can not spend. With a credit card a lot of people don’t really think of a limit as their limit.
• Not paying on time- Just like with any other bill your credit card bill will show up monthly and even if you didn’t purchase anything you still may have to pay a monthly fee. You don’t pay the bill this month and then the next month comes and you make purchases. You are now dealing with a bill that is 2 months worth of purchases and now extra fees. This may mean you are stuck not being able to afford the payments or getting your credit limit lowered or worse your account in collections.
• Paying only the minimum- Credit card bills usually will tell how much you’ve spent since your last payment and there will usually be a minimum amount that you can pay towards your bill. A lot of people end up thinking, ‘I spent $700 but they are only asking me to pay $250’. This is a trap that a lot of people can get caught up in because they never catch up on their payments. They keep paying a little here, a little there and are going to end up with a huge bill at some point and possibly points against their credit.
• Not being aware that the credit is technically loaned money- As much as a credit card feels like free money, it is not. Your credit card limits are money that the credit card company or bank or store is giving you to spend more money but they expect that money back. Unpaid credit card accounts that were closed can stay on your credit up to 7 years. That means it will impact any credit decision you make until it is resolved or cleared from your credit history.
• Getting a bunch of cards and overindulging in them all- We all know that every place that we go to, other than restaurants and fast food have some form of a credit card. You walk in to certain stores and are almost instantly bombarded by either an employee who has a quota to fill or flyers/signs that are discussing and showcasing the credit card. Some cards are amazing to have because of the benefits and cash back opportunities, but most credit cards will do nothing but rack up your bill and entice you to buy things you didn’t need. Plus, you still have to make payments on all of those cards monthly.
HOW to GET PAST the CREDIT TRAPS
• Know Your Limit- Everyone knows how much they are making when it comes to their paycheck each month. Usually people know how much their household bills run each month. If you are going to use your credit card for your everyday expenses and other purchases then you need to know what the card limit is.
• Try to Always Pay on Time- When you pay attention to when your bill is going to be coming out you are able to start preparing to pay that bill. Paying within the time that your credit card bill says will all the card company to not only trust you with a higher limit to your card but there is a possibility that they will send you an offer for a better card. If you are a good customer who uses their card and pays you bill on time they will do what they can to keep you with their company.
• Pay Full Payment- This may not be something that you can always pull off but definitely pay more than the minimum. This goes along with paying on time and it’s something that your credit card company is paying attention to and reporting to the credit services about.
• Pay Attention to Your Credit Score- You don’t have to watch it like a hawk but it is important to have a credit monitoring service and to check what is going on with your credit. When you are keeping an eye on your credit you are less likely to get a surprise if you aren’t able to get some line of credit or your credit card company offers you a higher limit. Also, if you are paying attention to your credit you know if anything that has nothing to do with you is affecting your credit.
• Only Get the Cards You Believe You’ll Need- This may be a bit difficult for a lot of people because you may think, ‘I shop at store X all the time and look how great these benefits are’. You have to really think how that card will add to your life and not subtract. If you truly only go to store X several times a month and having the card will save you money, then get it. If the card is for a store or place that you find yourself in once every 6 plus months and you don’t spend more than $100 every visit, then it isn’t worth it. Find out if your favorite places has a shopper rewards email list or loyalty card, these can allow you to accumulate benefits and rewards without getting a credit card.