When used the right way, credit cards can help you effectively manage your finances, build your credit score, and earn rewards. With credit cards, the best thing you can do is only charge the expenses you know you can afford to repay. Let’s take a look at some of the best ways to use your credit card:
To Consolidate or Repay Debts
It may seem counterintuitive to use a credit card to repay debts. However, many credit cards come with a 0% APR for balance transfers as an introductory offer. This introductory period can last up to 18 months. Using such a card to repay or consolidate your debts could work in your favor, provided you repay the balance before the completion of the introductory period.
Earn Rewards
Many credit cards help you earn rewards in the form of miles, points, or cashback on purchases. The type of rewards credit card you sign up for should be based on your lifestyle. For instance, if you dine out frequently, it would be best to get a credit card that either gives you points or cashback for dining out. However, remember to not go out of your way to charge expenses to your credit card simply to earn the rewards. Also, remember that rewards credit cards usually have an annual fee. So, it only makes sense to get a rewards credit card if you earn enough rewards to make up for the fee payment.
To Improve Your Credit Score
If you already have a credit card, you should utilize your credit card in a way that will help you improve your credit score. This would include repaying your balance in full every month and not missing any payments. If you don’t have a credit card, consider getting a secured credit card to build your credit score.
Financing Purchases
Financing big purchases with your credit card is a good option if you’ve recently signed up for an introductory 0% APR credit card since it can allow you to repay your debt during the interest-free period.
Using a credit card strategically can give you many benefits. However, when it is not used smartly, you can end up attracting high-interest charges, lowering your credit score, and increasing your total debt. So, make sure to carefully assess your credit card usage.
