Credit cards traditionally have a terrible reputation. All you hear growing up is to never open one because they are the devil. This is a myth. Anyone who ever said this does not know how to use credit cards properly. Since the majority of the population is not fiscally responsible, their opinions are thought to be true. Ignore them. Credit cards can be your best friend if you have self-control.
In the fifth grade, my teacher told me not to ever open a credit card because she had managed to open two of them within her first semester of college and had to fight her way out of debt. At the age of 10, when all I knew about credit cards was that they were plastic, I had already learned to associate them with a negative connotation. The truth of the matter is that credit cards are rewards cards for spending money. As long as you don’t spend money you don’t have, then they are a gift. Unfortunately, consumer debt is an easy habit to get in to.
If you know you’re a responsible adult who budgets wisely and only buys what you can afford, try to purchase everything possible on credit. The points/rewards advantage is too good to pass up. Buying everything in cash and debit cards gives you nothing back for what you spend. At the least, a credit card will give you 1% cash back on your purchases, if not 2 or 3. To put that into perspective, the worst credit card will get you $25 back after $2,500 in purchases… Not great, but better than the $0 you’ll get with cash or debit.
Attempting to put as many possible expenses on your credit card will only help you build your credit. As a millennial, your credit history is young. It can be impacted a lot in a short amount of time.
Before I knew how to manage money, I was a kid with no job. I used my credit cards to pay for things while money was short. Though I made all my minimum payments on time, I paid more interest than I had to and my balances kept going up. This eventually resulted in a 590 credit score! That is terrible. That could impact my ability to get a car loan or even get me denied when applying for an apartment.
Since then, I make my student loan payments every month and also zero out my credit card balance so it never carries over, never paying a dime in credit card interest. I’m proud to say in less than 2 years, I’ve swung my score up to a 770. I’m eyeing 800. This goes to show the impact that spending can have on your credit. As long as you’re making payments on time, credit cards can drive your score up, making you a valuable candidate for low-interest loans. The higher your score, the more negotiating power you’ll have when it’s time to get a mortgage, car loan, or business loan.
Points and Rewards
Getting rewards points, cash back, or miles is the big hook that credit cards reel you in with. It works. If you’re going to get money or airline miles just for spending what you’d normally spend, why wouldn’t you? It’s the greatest incentive to use your credit card and a win-win for you and the company.
The hunt for the credit card that suits your needs is just as exciting. Sites like Nerd Wallet and The Points Guy are the experts in finding you the perfect card. If you buy tons of gas and groceries, there are credit cards that will maximize your rewards or cash back. If you love to travel like me, there are credit cards that give you double airline miles for every dollar you spend. You can also redeem your points for gift cards or at restaurants or hotels. These airlines love to compete for your business, so they will gladly offer bonus miles for spending a minimum amount in the first 3 months of having a card. This could equal $500 or more in free travel! I may be a geek, but it’s exciting to shop for the best deals and maximize your rewards.
More Secure than Cash
It’s to the customer’s advantage that apps like Uber and Lyft require a credit card. If you get charged twice for something, it’s easy to argue and revert the charge back to your card. If your card gets lost or stolen, you can report it and your credit card company will take care of you. They are much more secure than cash in this respect. Losing your wallet is never ideal, but the option to cancel or freeze your cards and at least get peace of mind that your money is safe makes a bad situation better. When traveling abroad, get a card that doesn’t charge international transaction fees. Debit cards often nickel and dime you for excess charges.
Don’t Mess with Store Credit Cards
When I was 18, I took a job as a sales associate at a department store. This store and every other department store makes it a point to encourage customers to open up “rewards” cards so they have an incentive to continually come back and spend more. As an employee, I received one of these cards because it was the only way to get my 20% employee discount.
Boy, did I use it. Though I made all my payments on time, the store credit card did not help improve my credit. It wasn’t linked to a Visa or MasterCard, just to the store. Store management gave us extra incentives for opening cards for customers. After every purchase, we’d ask customers if they wanted to open one to save money that day. All to often, we’d hear “my credit’s terrible, but let’s try”… They’d proceed to not qualify. In fact it would hurt their credit even more because credit bureaus penalize you for applying to cards when you shouldn’t be.
Unless you’re a die hard shopper at the store and really take advantage of the discounts offered by the card while paying the full amount off each month, then stay away from these. Though, I do have to say I’m a big Costco shopper and can’t wait to get their new Visa card!
Go Out and Get a Credit Card Now
You see all the benefits of having a credit card, so don’t forget that:
- They build your credit
- You can’t beat the points and rewards
- They’re more secure than cash
- Major rewards for frequent shoppers at stores
If your credit is abysmal, then be careful about what you apply for. As mentioned before, applying to too many credit cards can hurt your score. There are plenty of options to get you back on track and get that score up!