Credit cards can get a bad rap. Who hasn’t heard the horror stories of individuals running up five-figure balances and getting hopelessly enmeshed in debt? No wonder so many people feel they need to shun all plastic. But in reality, credit cards can be the unsung hero when it comes to your financial health. If you’ve been skeptical about credit, keep your mind open to current facts and features as you manage your finances.
An essential wallet accessory since 1950, the credit card has evolved from its original purpose as a convenient payment method. Today’s cards can help streamline spending, prevent fraud, and even build credit when they’re used responsibly.
1. Build Your Reputation as a Responsible Customer
Your reputation is everything. Any chance to build yours in personal circles or with reference to your financial reliability is worth considering. Credit cards can help you build a track record of on-time payments, responsible credit management, and long-term reliability. Your credit behavior feeds into what makes up your credit score, which is an essential number to manage throughout life.
Lenders, utility companies, and even employers perform credit checks before choosing to do business with you. If your score is lower than their threshold, you may miss out on once-in-a-lifetime opportunities. Consider adding a credit card to your wallet to help you build credit over time. If you’re new to credit or have a low score, consider a credit builder card. These cards are a great entry point to both building credit and becoming familiar with its use.
2. Manage Monthly Cash Flow
No matter how much you earn, it always seems like someone is clamoring for your money. And some bills cluster around certain dates, causing a massive dip in your checking account. If you have irregular income, it can be a challenge to manage severe shifts in account balances. Consider using credit cards to smooth out your spending and cash flow as you manage your household finances.
You can use a credit card for groceries, gas, and shopping to take advantage of payment simplicity and flexibility. Generally, credit card bills are due between the 1st and 28th of the month and can be adjusted. Review due dates for major expenses like rent, car payments, and loans, whose due dates are often immovable. Compare your income against these key dates and request a payment due date change that evens out your cash flow. Making this change can reduce massive dips in your account and allow for more predictable expenditures.
3. Track Your Spending with Ease
Managing a budget isn’t often on the top of the list when it comes to fun things to do. But credit card users have an advantage in doing so thanks to easily exportable transactions and data analysis tools. Most credit card issuers automatically categorize spending and offer spending alerts to help customers manage their usage. Review the features offered on your credit card dashboard to help make budgeting a breeze.
Use the in-platform tools to review trends and identify overspending or seasonal spikes. Review line-item transactions to confirm charged amounts and favorite stores. Export transactions into a comma-separated-values Excel spreadsheet to run your report for the date range of your choosing. Reference dynamic graphs and charts to get a visual of your spending trends, making management easier and possibly even fun. Even if you’re not an accountant, navigating your finances can be easier with the tools provided by your card issuer.
4. Stop Fraud in Its Tracks
The last thing you want is for your checking account to be compromised. If you’re a longtime debit card user, you know you can conduct transactions just as you would with a credit card. But in the event your card gets stolen, thieves are taking money directly from your checking account. While debit cards are protected similarly to credit cards, restoring your checking balance can be challenging. Smaller institutions may require more documentation of your claim or take longer to restore your funds.
When you trust your transactions to a reputable credit card issuer, you can be confident knowing that advanced fraud protection is on your side. Transactions outside of your normal usage will often be flagged by their systems, which will reject them or request confirmation before approval.
If your card is compromised, contact your credit card company to report it. Fraud teams can quickly cancel both fraudulent transactions and your card, then issue you a new one, often overnight. While initially scary, credit card fraud is preventable and manageable when the right issuer has your back.
Confidently Using Credit While Managing the Temptation to Overspend
Hesitancy about using credit cards is a reasonable feeling, especially if you grew up witnessing irresponsible credit use. Be realistic about your spending habits and temptations. If you’re an overspender, use credit cards with care. Keep your credit limit low and/or use a secured card to ensure you’re never in danger of defaulting.
Remember that credit cards are a tool to help you manage your financial life. When you treat them as such, you can separate the emotional pull of instant gratification from their functional benefits. Review your credit report regularly to review your credit use, on-time payment history, and other factors that drive your score. Include this action item as you review your monthly budget and savings progress, and you’ll manage your credit with ease.
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