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How to Use Your Credit Card to Your Advantage

If you’ve been paying attention to financial headlines, you will notice that consumer debt is at another all-time high. Also, credit card debt is at an all-time high as consumers are using their cards like never before. However, most individuals who are using their credit cards are losing money due to their monthly interest payments.

Before I get started, I want to say that I am not encouraging you to buy things you can’t afford on credit, that would be a terrible mistake. However, I do believe you should use your credit card to your advantage. That way credit card companies pay you a check instead of sending you a bill.

If you own a credit card chances are it offers some reward program that gives you at least one or two percent cash back on purchases. Yes, that’s free money! Imagine purchasing $500 on your card and receiving $5 or $10 for the transaction. But what about the interest you pay? Well, you only have to pay the interest expense if you don’t pay the balance before the grace period ends.

Beware, not all credit cards offer a 20-30 day grace period where purchases don’t accrue interest. Also, the interest on new purchases will occur immediately if the card already has a balance. It’s best to check to see what reward program your card offers and if it has a grace period or annual fees. For more information, check out this site for finding a great rewards credit card.

Increase Your Credit Score with Your Credit Card

It’s not only about the free money you can earn with your credit card. A credit card even with no balance can also help your credit score. Merely having access to a line of credit can improve your overall credit score. Moreover, it may not prove your creditworthiness; it does mean you can draw additional funds if needed. On the other hand, using your card and paying it off every month will have a positive impact on your score. Paying off your balance provides a positive track record to creditors, who will view you as a low-risk borrower.

Even though you don’t want to take on debt, you still need a positive credit score. If you’re looking to rent a home or apartment, landlords will want to know your credit score to see if you’re a reliable renter. It’s even possible that a landlord may reduce the rent cost if the supply of creditworthy renters is not available. It is essential to use a credit card as it can provide you with a credit history, and not having a credit history means you may be a high-risk borrower.

If you’re an individual who has spending issues because of the available credit, I’d advise that you keep the card’s maximum line of credit to a minimum, perhaps no more than a few hundred dollars. Remember, the goal is to receive money from your card and not pay interest.


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