Treat Yourself to Credit Card Benefits
Thursday, August 3, 2017
Why Use a Credit Card?
About a third of people under 30 have never had a credit card. While it's always a good idea to try to keep yourself out of debt, you might be missing out on some benefits when you shy away from credit cards.
Credit Cards Build Credit
Having a credit card, and using it responsibly, can help you build your credit score. Lenders use that score to determine if they're willing to give you a loan and what the interest rate will be. If an excellent credit score can lower your interest rate by even a half a point that can save you almost $10,000 on a $100,000 mortgage loan.
There is a world of discounts online. From Cyber Monday to Prime Day, the savviest of shoppers knows that if you really want to pay the least amount possible for that new TV or your Alexa, you're probably going to find the deal online. Having a credit card means it's easy to shop those deals without going through a third-party payment site.
They Provide a Safety Net
You don't always have the money in your bank account to pay for an emergency like a broken down car or a busted pipe in your home. A credit card can give you the flexibility you need to address a problem right this minute and work to earn the money to fix it over the next few weeks.
Credit cards don't just give you a safety net during emergencies. Did you know that many of them provide automatic insurance for about a year on big ticket items purchased with the card? So, if your new TV gets destroyed when that pipe burst in your home your credit card company might be able to give you money to go toward its replacement.
How Do You Choose the Right Credit Card?
The most common types of credit cards are rewards cards and low-interest cards. Rewards cards will give you points or cash back on the purchases you're already making. This type of card makes sense if you use it often and pay it off every month. A low-interest card doesn't typically give you any reward points but doesn't charge you as much each month in interest. Each type of card has different requirements for qualifying, so be sure you check before you apply!
Do You Plan on Carrying a Balance?
If you don't think you'll be able to pay your card off every month that means you'll be carrying a balance on it. That balance will be charged interest, which will be an additional expense on top of what you already owe. If that sounds like your situation, you might want to consider a low-interest card.
Where Do You Spend Most of Your Money?
A lot of reward credits cards will offer additional rewards points on certain categories of spending, like gas or coffee. Take a look at what you spend during the average month and see if your rewards line up with your spending habits. This will help you maximize your reward card benefits.
How to Use Your Credit Card Responsibly
Once you have a credit card, the most important thing you can do it use it responsibly.
Budget and Keep Track of Your Spending
If you're not used to using a credit card it can be easy to just swipe it without thinking about how much you're spending. Be sure you make a monthly budget before you start using the card and set up ways to monitor your spending. You can usually do that either on your card's account or you can set up an alert system through an app like Mint. This type of app will monitor and categorize each of your purchases and alert you when you're about to go over your budget. If you need help making a budget, you can always set up a session with our financial counselors.
Pay It Off
It can be tempting to carry a small balance on your card, but that small balance can easily turn into a large one. Be sure you stick to your budget and pay your card off every month whenever it's possible.
Monitor It for Fraud
The sad truth is there will also be cyber criminals who are more than happy to use your credit card number for their own purchases. The good news is you can set up alerts for your Visa cards, so you always know if there's fraudulent activity. If that does happen to you, be sure to contact your SAFE branch (or your credit card provider) and report it. They'll help you shut down your card so that there are no additional fraudulent charges and they'll also open an investigation. Most of the time you won't be held responsible for those charges.
When you use them responsibly, the benefits credit cards provide are great. Think you're ready? Apply today.