I have shared my journey with credit card debt – and my debt is very small compared to the amounts that others share on financial blogs. My natural inclination is to be frugal with my money. But I became oblivious and allowed my money to manage me for a little while. Thankfully, I have become a stronger wealth manifestor as a result!
Although credit cards can run amok if you don’t watch them (don’t you love the word amok?), they have a lot of good going for them:
- They are convenient. You don’t have to worry about arranging all the president’s faces in the same direction in your purse or wallet. Just tuck that shiny little piece of plastic in the perfectly-sized slot, and off you go. They can also be used to pay bills online, or look oh-so-professional when you take clients out for dinner. Just kidding – they are so much easier than cash or checks.
- They help you budget and track your spending. Most credit card accounts have a great tracking function, which allows you to see just how much of your charges are going to necessities or convenience items. You can also bundle your payments for monthly expenses into one single bill payment.
- You can earn money. I recently posted about paying off Credit Card #1, which had a hefty 13.99% interest rate. That card is now dedicated as payment for budgeted items, like my oil deliveries, groceries, electric bill, and internet bill. I pay this card in full by the end of the month, and every charge earns between 2 and 5% cash back. That is money in the bank.
- They help your credit score. I still don’t completely understand how they come up with the magic FICO number, but having credit cards and paying them off in a timely manner can affect your credit score in a good way.
- They can offer added protection. Many credit card companies offer chargeback protection on disputed purchases or services gone wrong. Your credit card company may have a price protection guarantee or extended warranty program, and some cover items against accidental damage or theft within 3 months of purchase. But this is determined on a case-by-case basis, so don’t assume an item is protected. Contact your credit card company to find out about protection programs and other benefits. You may not be aware of all the benefits available to you.