We Should All Have A Credit Card

Whenever we turn the TV on, open up a magazine or visit the internet we get bombarded, or so it seems, by credit card offers. They are everywhere and they are relentless in the pursuit of new clients.  

My mother took out a small loan early last year, and she started to receive one or two credit card offers every week. Same with my son soon after he applied to college.

Credit card usage is today seen as a negative by many. Some belive in only having one in case of emergencies and others do not believe in having any at all. To recommend using one has become almost irresponsible almost evil advice.

Using a credit card to buy things you can't afford or even need is certainly not smart and somewhat irresponsible. The interest charges can pile up over time. Why do you think minimum payments exist? Finance charges and the compounding interest add up.

There are also pluses to using credit cards and zero, yes no drawbacks when used correctly.  I believe in smartly using credit cards. Otherwise you should not even touch one.

The ease in of usage has many pros

Travel hackers love credit cards.  Visit Jonathan and Brad over at CHOOSEFI and you will see. Some credit cards offer 50,000 bonus points just for signing up and meeting the minimum spending requirements.  They only use the cards to obtain the benefits and the pay the bill in full. Many cards offer points for every dollar that you spend. These points can be converted into airline miles for discounted or even free travel and hotel stays.  All of this for purchasing what they would have anyway.

Don't travel, there are many other rewards available. These include gift cards, merchandise and shopping discounts. Other offers include cash back, some offer teaser rates like a 0% interest rate for an introductory period and/or for balance transfers.  Some even offer free swag for joining.

Credit card churning is done by finding several credit cards that offer the rewards you’re after and applying for them. Once you receive the rewards, you stop using the cards, and cancel before having to pay any fees. You then repeat the process with a new batch. Not as easy as it sounds as there is a lot to keep up with and if not timed correctly your credit score will take a hit.

Many credit cards offer travel insurance and emergency assistance at no extra cost. They also offer added protection by allowing users to dispute both billing errors and defective merchandise. These are either not available or harder to come by when using cash.  They also provide financial assistance in case of an emergency or unexpected expense.

One fact that many overlook is that over time, the proper use of credit cards has a positive effect on your credit rating. Somewhat frequent purchases and a solid payment history help achieve a respectable credit score.   A higher credit score will help you qualify for lower interest rate on loans. The difference between a loan at 7% versus 3% is staggering. Speaking of credit scores, One of the factors that most heavily influence your credit score is your debt to available credit ratio. Maxing out lowers that score.

Credit cards have their disadvantages as well. The ease of usage may lead to spending more than you can afford.  Do not go chasing the points/rewards. Stick to purchasing items you need.  Quite often they are used in an unwise manner leading to a lowered credit score,  too much debt that can potentially lead to bankruptcy. The checks your credit card sends in the mail, shred them.  Nothing more than a cash advance.

Card issuers will make money from every single purchase you make with merchant fees. The multiple charges to cardholders; the annual fees, cash advance, balance transfer, late fees and interest payment. Some even sell customer data to other businesses. Completely legal as data is anonymous and aggregated, meaning you can not be singled out.  They make money by utilizing your information.

Do your research, it is time well spent.  Some items to consider when choosing a credit card:

-Don't get a card with annual fees. The benefits may not offset the expense.

-Look for a low-interest rate. The plan is to always pay in full, but life sometimes happens.

-Search for the rewards program that best suit you.  

-Read the fine print.  Sad to realize that your 0% balance transfer was for only twelve months once you receive that bill on month number 13.

Issuers are betting that by offering perks you will buy more and end up carrying a balance.   So stay within your budget and pay your bill in full, when due. This way it is nothing more than an interest free loan.

Never run up or carry a balance, so if you can't afford to pay the bill, you probably should not be buying it.  Do not, under any circumstances miss a payment, take a cash advance, or ever max out your card. Reap all the rewards with none of the negatives.

Review your monthly statements and keep track of your purchases. Report lost/stolen cards immediately. Use them wisely and you shall be nicely rewarded.  Credit cards are not for everyone, if you even think that they might lead to trouble, you should probably stay away.

I am sure I missed a benefit or three.  Please add any that you have.