Credit Cards

Credit Cards

January 08, 2024

Credit cards can either be our best friend or our worst enemy from a financial perspective. I am a big proponent of using credit cards properly for the many benefits that they provide. This is a particularly timely topic now that the holiday season is behind us.

In my opinion proper use of a credit card is one of the most important ways to help build a strong financial foundation for yourself. Proper use is easy to say but sometimes not easy to execute. By that, I simply mean that you should pay off the card entirely every month. When you do this, you don’t need to worry about interest charges or blemishes on your credit report as you never carry a balance month over month. The card basically becomes a simple way to pay for your purchases and help you stay organized because you can pay off the bill for everything you purchase once a month when it comes due. If you find yourself in a situation where you cannot afford to pay the bill, that indicates that you are living above your means and you should take steps to lower your overall living expenses. Paying off the card in full every month rather than carrying over a balance is the more important aspect of credit cards.

The next recommendation for credit cards is to shop around to the various options and determine which card offers you the best rewards to suit your lifestyle. There are many different cards in the marketplace with rewards for things such as travel, dining, airline miles and many others. Find the card that gives you the rewards that you will be most likely to utilize in your life. Balance these benefits with the annual fee that many of these cards charge. Lastly, go ahead and utilize the rewards regularly rather than letting them build up for vanity purposes.

Lastly, there is no need to have many different varieties of cards. Pick one or two, ideally from different providers (Visa vs AMEX) and utilize these to their fullest. Keep this card long term as that also helps your overall credit score.