Getting On Track With Credit Cards
Credit Cards are awful! Don’t use a credit card, you will never be able to get out of debt! Never get into credit card debt! We have all heard those statements before. While those statements can be true for those that do not have self-control, they are not true for the rest of us. Credit cards can provide a boost to any financial plan if used properly.
Financial Planning
First, lets talk about a basic financial principle, financial planning. If you already have your own financial plan, good on you! You can skip to the next section.
If you don’t have a financial plan created yet you might be thinking, I don’t need one I don’t have enough money, I already have a good sense of where I am at financially, that is for my parents and not for me. If you have one of those thoughts have you stopped to think what might the future look like? Am I saving enough? Am I saving efficiently? Is my life protected? Is my house, car, or other assets protected? What is the best way to pay off my debt? A good financial plan will answer these questions and so many more. The main purpose of creating a financial plan is to see where you are at and where you are heading. If changes are needed on your course, the plan will provide insight into those course corrections. The point is, everyone needs a financial plan and you are only hurting yourself if you don’t take the time to have one put together.
Benefits of Credit Cards in your Financial Plan
We know that financial plans can help us to get out of debt and stay out of debt so why should you use a credit card? Let me tell you the secret to credit cards, if you can use your credit card like it is your debit card and not an unlimited funds card, the credit card will become your best friend.
Before I get into the specific perks of a credit card, let me share one of the biggest reasons why you should always have a credit card accessible. In this life there are a few constants or sureties, taxes, death, and change. Sometimes that change brings sudden and unexpected expenses. There will be times that you won’t have the cash to pay for these costs, but you will need to pay for them to avoid penalties or worse losing an asset. This is where a credit card can save you. If you always have a credit card with little to no balance you will have the means to pay for that expense. Yes, that might mean that you can’t pay off your balance in full at the end of the month, but it provides you a way to still put food on the table. If you find yourself in one of these situations, make sure that you pay that credit card off as fast as possible so that the debt doesn’t drowned you. If the expense is something that you won’t be able to tackle for a while look at other options of consolidating debt into a lower interest rate.
General perks you can find on credit cards.
Rewards (cash back and points)
Free Credit Score
Consumer Protection
Car Rental Insurance
Online and In-Store Discounts
Introductory Offers
0% Interest on Balance Transfers
Earn Interest on Money Already Spent
Each credit card will have it’s own perks and incentives unique to that card, it is important to shop around. Let me share a few comments on these perks to demonstrate how this can help and boost your financial plan.
0% interest on balance transfers – Most credit card companies make money off the interest that is charged on outstanding balances. To attract people with outstanding balances card companies will offer 0% interest on balance transfers. The time period for this perk can range. If you have a balance on a high interest card this can save you hundreds if not thousands by transferring the balance to a 0% interest card. Again, once it is paid off live within your means so you don’t have credit card debt.
Rewards – It has been proven that going on vacation is good for our physical health, mental health, and we become more effective employees or employers. Unfortunately vacations cost us money. The major obstacle for those that do not go on vacation is the cost. I am not suggesting that you use your credit card to finance a vacation, but I am suggesting that you use the rewards to supplement and reduce the cost of your trip. If you enroll in a rewards credit card you accumulate points and rewards for spending money. If you use your credit card like you would a debit card, only spend money you have and pay it off at the end of each month, then you will end up with a stash of points or cash back to use towards a vacation. This not only reduces the amount of money that you would spend, helping your financial plan, but will provide you with a refresh and focus.
Consumer Protection – Two sides to this – credit card can extend a products warranty as well as price protection. Credit cards will protect your purchases that you make in particular, electronics, and will extend the warranty on items. This will allow you to purchase an item and have an extended warranty protection at no additional cost through the credit card company. So, now instead of having to buy a new TV it is protected and will either get fixed or you will be refunded to purchase a new one. Second, some credit cards will offer price protection. You can take advantage of this after you purchase an item and the price of that item decreases, you can petition your credit card company and they will reimburse you for the difference. There are several apps that you can download that will do this monitoring for you or you can do it on your own. Either way it is money in your pocket that you can save for future goals and expenses.
Credit Card Caution
I have mentioned the benefits of credit cards, but if not used in control they can take you off the rails and spiraling into a financial pit of despair. The best and only way to use a credit card is to use it as you would your debit card or cash. You can only spend the money that you have. If you don’t follow this advice the debt will start to build and you will end up being buried in debt. When this happens your financial freedom is taken from you and you become trapped. I don’t know your personality, but you do, and if you are one that can’t control your spending habits with a credit card, it doesn’t matter what benefits there are, do not get one. These are powerful tools, but without restraint they will turn around and bite you.
Having a financial plan can help you to have direction and purpose when it comes to finances, a credit card is merely another arrow in the quiver to help you get to your desired target. When used with prudence and care you can enjoy some of the perks associated with credit cards to give your plan a boost and reach your goals sooner.
