Credit cards are evil!!! You shouldn’t ever touch a credit card!
Just kidding. I’m a huge fan of credit cards. It’s because they offer a massive amount of positives with absolutely no drawbacks – if you’re responsible. Yes, there is nothing inherently evil about credit cards. The only reason the negative stigma exists is because everyone knows someone who hasn’t been responsible with credit cards. As long as you follow my 10 tips for using your credit card responsibly, you won’t ever have to worry about a messy situation.
Tip #1: Don’T Get Too Many
This rule applies to everything in life. The more you have of something, the harder it is to keep track. I don’t know how that family on TLC has 19 kids ha ha. I don’t recommend getting a credit card every time a store tries to give you one. While it is possible to manage 10+ cards, I just can’t recommend the practice. Anything less than 5 is manageable. I actually recommend getting more than just one. Certain cards are good for certain things. Some cards give cash back for groceries, some cards take ten cents off each gallon of fuel you buy. Use cards that match your purchases. Think about getting a specific card for groceries, fuel, travel, you name it.
Tip #2: Pay in Full
This isn’t a must-do but it makes using a credit card wayyyyy simpler. Trying to shuffle payments each month just makes using a credit card a hassle. Each month, I pay in full. I just make sure there’s enough cash in my checking account to cover what I owe. The next tip makes it super simple to pay your balance each month.
What a lot of people say is paying a credit card in full each month won’t build your credit score. This isn’t true. For instance, when I got my first credit card, I had a FICO score of 708 (I wouldn’t have a score at all but I had taken out student loans). After 2 months with no leftover credit card balance, my score increased to 736. That’s a heck of a fast jump if you ask me!
Tip #3: Set up Automatic Payments
I strongly encourage you to set up automatic payments. All you do is link your checking account with your credit card company. You can set when you want the payment to be withdrawn and for how much. With Discover card, for instance, you can schedule a payment to go through same-day. If your bill is due on the 18th, you can have it automatically withdrawn from your checking account the very same day. With every card company I know of, the payment will post same day, even if your bank is slow. And banks are usually slow. They normally take 3-5 days to move money around. That’s insanely slow by today’s standards. But that’s good for you and I. We get to have money in our checking account for 3-5 days after our credit cards are paid. Yay to free money!
Tip #4: Don’T Consider It an Emergency Fund
Some people like to have a low emergency fund in favor of using credit cards. That’s not the wisest decision. Getting into debt when you’re already having money trouble… let’s not do that. Instead, have a healthy reserve in a bank account. Also, when doing this, you know you’ll always have a fat bank account for paying off your bill.
Tip #5: Respect the Card
A credit card is a big responsibility. It allows you to get a loan with just the swipe of a plastic card. It’s not something to take lightly. Although it’s a good idea to get one early on to establish credit, don’t do it if you’re not comfortable.
When I think of a credit card, I think of it as a tool to get me farther in life. It’s a resource. Using it for getting into debt and covering emergencies is the opposite of how you should be thinking. Use the card for advancing your life.
Think of all the amazing ways a credit cards can make your life better: cash back rewards, discounts on products, free warranties, free travel insurance, free item replacement insurance – just to name a few! When someone is giving you this much, it’s probably a good idea to respect it. As they say, don’t bite the hand that feeds you. If you abuse the cards, they will punish you with high interest. Your perks won’t mean much then. Let it be a symbiotic relationship.
Those are my five tips for using your credit card(s) responsibly. As long as you have the proper mindset, a credit card can only help you. It will not bite back one bit. Credit cards are not inherently evil despite what some well-known radio personal finance people may tell you. Follow these tips and you’ll do just fine!
I’m a personal finance freelance writer and webmaster. I welcome you to visit me at www.thefrugalpreneur.com