Ignore the experts; Credit cards can be great for your finances


When you're trying to get out of debt, get back on financial track, or recover from bankruptcy, chances are you listen to the experts. The experts will tell you things like:

  • Pay only with cash
  • There is no such thing as responsible credit card usage
  • If you use credit cards, you will never get back on track.  

Well, I am here today to tell you that that IS a responsible way to use credit cards.   In fact, there a lot of advantages to using credit cards!  Credit card usage is not only the responsible thing to do, it can help you get ahead in your financial life - as long as you can use credit cards responsibly.  Knowing your limits is the key to reaping the benefits of using credit cards.

Here are some of the benefits of using credit cards:

  • Building Credit: when you use a credit card, assuming you use it responsibly, of course, you build your credit. As your credit score climbs higher, so does your position in the eyes of banks.  So, if you were to go apply for a mortgage, the higher your credit score, the lower interest rate your mortgage would be.  And, a lower interest rate means lower monthly payments!
  • Rewards Points: This is my favorite benefit of using credit cards!  Perhaps you've heard of credit card churning as a way to earn travel rewards?  I have responsibly used credit cards for years, and have found that in an average month, I earn $50 in rewards, on top of the twice yearly new card bonuses I receive.  
  • Easily Track Spending:  Another nice feature of using credit cards is they make it very easy to track your spending.  Mint.com offers a free service where you can link all of your accounts in one dashboard, set budgets, and categorize transactions in a way that you could not if you only used cash.  That puts all of your accounts and budget in one place!
  • Fraud protection:  If you haven't been touched by fraud, then I'm sure you know someone who has.  In the event that your credit card information is stolen, your credit card company protects you from having to pay for fraudulent charges.  If your debit card gets stolen, your bank can hold you accountable for transactions you don't make.
  • Travel Protection:  Ever rented a car while traveling?  Ever booked a trip and then had to cancel last minute and eat the cost of the trip?  With many major credit cards, trip and rental car insurance are included in the benefits of being a cardholder.
  • Extended Warranties:  My husband got a new phone, and 2 months later cracked the screen.  The cell phone manufacturer wouldn't cover it, because the damage was accidental, but our credit card company did!  In most instances, with most credit card companies, accidental damage is covered up to six months after items are purchased - and it's not just limited to cell phones!

If you know that you cannot use credit cards responsibly, then this is obviously not for you.  If, however, you love free money and a bump in your credit score, consider using credit cards for all of the advantages they provide over cash!

Gretchen Lindow is an Accountant for Hilton Hotels in St. Louis, by day. When she graduated with her Bachelor's Degree in Accounting she had $110,000 of student, auto, and mortgage debt to go along with it. Her family was surviving financially, but with the impending arrival of her daughter, and her husband's health starting to fail, she knew that something had to change. As a result, she is a freelance writer and blogger at Retired by 40! At night.

This article was originally published on MarketIntelligeneCenter.com

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: personal finance , Stocks

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