Do you think credit cards are bad?
I did when I started handling my own finances.
But they’re not bad.
Credit cards are tools.
And like any tool, you have to respect them and use them properly.
If you were careless with a power drill and drilled through your hand, you wouldn’t blame the drill.
You wouldn’t label all drills as bad and never use them again.
But for some reason we do that with credit cards.
And use our debit cards instead.
That’s a bad idea and here’s why:
A credit card provides additional security for your money.
Let’s look at an example for this one.
You stop by Kroger on the way home from work and pick up some chocolate milk for your kids.
The cashier at Kroger decides to steal your payment information and go on a spending spree.
She spends $1,500 on clothes at Target.
If you used your debit card, that $1,500 is immediately taken out of your bank account.
That’s a big ouch.
You have to fight to get your money back.
Hopefully your bank is good about it but you never know.
If you used your credit card, $1,500 gets added to your bill.
When you get your bill at the end of the month, you dispute the charge.
Then the credit card company fights for you because they are getting their money back.
And no offense but Visa and American Express have more fighting power than you do.
The important part is the $1,500 never leaves your bank account.
Your only inconvenience is changing your Amazon Prime payment method because you got a new credit card.
Build Your Credit Score
What’s the best way to build your credit score?
By paying your bills on time.
Using your debit card is like paying with cash.
It’s not a bill and doesn’t build your credit score.
If you have credit card bills you pay on time every month, you will build your credit score.
You might worry about the comment: “Too much available credit,” on your credit score.
But that comment doesn’t hurt your credit score as much as not having enough credit history.
This is my favorite part.
Getting rewards for just buying what you normally buy.
You can get a card for any reward you want.
You like getting cash back at the end of the year?
There’s a cash back card for that.
You like traveling?
There’s a card that gives you miles.
I have a friend that has flown to Hawaii every year for the past 4 years.
And he hasn’t paid money for a plane ticket yet.
That’s pretty sweet.
Find a rewards card that matches your interests.
See, credit cards aren’t so bad.
And if you pay off the balance every month, you won’t pay any interest.
So it doesn’t even matter what your interest rate is.
So the next time someone goes off on the dangers of credit cards, use the drill analogy.
You can even take credit for it.
Are you using a credit card? If so, which one?
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