Credit cards have many advantages. They offer flexibility, help you build credit, and often come with some pretty great rewards. On the other hand, dealing with credit card debt is stressful and expensive. Knowing when and how to use your credit card to your advantage will help you capitalize on all the benefits and avoid the potential risks.
Let’s get started.
How to Build Credit
Any time you apply for a loan to finance a house, car, or other large purchase, good credit will help you qualify for better loan terms with a lower interest rate. Good credit gets built over time, so even if you have bad credit (or no credit) right now, you can start building credit by using your credit card responsibly. Here’s how:
Pay your bill on time and in full every month.
Paying late does more than just hurt your credit score. When you don’t pay on time, you start owing interest and often costly late fees. If you pay on time, you only pay for what you actually spend — no interest and no late fees. If you’re worried about forgetting to pay, you can set a reminder on your phone or set up automatic payments.
Set a monthly credit card budget you know you can afford.
If you want to be extra sure you don’t overspend, try this: choose one or two payments that you make every month (such as your health insurance bill) and use your credit card only for those payments. If that goes well for a month or two, you can keep adding more types of credit card payments month by month, until you find the right balance between caution and convenience.
Cary cash and/or a debit card.
A 2001 study found that people were willing to pay significantly more for the exact same item when using a credit card instead of cash. If you find that certain situations, stores, or events often tempt you to spend more than you want to, consider leaving your credit card at home on those days, or at least bring another form of payment with you, like cash or a debit card.
Check your account activity regularly.
Logging into your account every week or so helps you track your purchases. This helps you budget for next month and potentially cut back on spending where necessary.
Get Rewards and Perks
Rewards are one of the best advantages credit cards have over cash. When you use your card wisely and take advantage of rewards, you save money as you spend. You can earn rewards simply by purchasing things you need!
Getting good rewards starts with choosing the right card. Look for a card that fits your needs and offers the terms you want. Also look for a card that won’t overload you with hidden fees (processing fees, annual fees, cash advance fees, balance transfer fees, etc.).
When it comes to rewards, make sure the card offers options you’ll actually use. With a Valley Credit Union credit card, you get to choose what rewards you earn with uChoose Rewards. Options include cash back and gift cards at more than 100 retailers that cover dining, entertainment, gas, travel, and more.
Avoid Credit Card Debt
Monthly bills, food, gas, and other expenses can make it hard for many people to get by while sticking to a budget. Plus, many cards have cripplingly high interest rates and hidden fees. It’s no wonder so many people end up with credit card debt. As of June 2019, the average credit card debt per US household was $8,398.
Unfortunately, the only way to avoid paying interest on the items you buy with your card is to stay out of credit card debt. If you already have debt, and you want to pay it off, know that you have options. At Valley Credit Union, we’re always happy to work with our wonderful members in the Salem, OR area to help them improve their finances and reduce debt.
Debt consolidation can be a great strategy for people who are facing several different types of debt. If you only have a small amount of debt, though, strict budgeting might be enough to get you on track. There are several great budgeting apps out there that can be really helpful.
Choose a Credit Card That Helps You Save
If you’re thinking of getting a new card, consider Valley Credit Union. Our credit cards are a great low-interest, no-hassle option for anyone in the Salem, OR area. They offer excellent security, rewards, and other perks. Don’t hesitate to get in touch to learn more and ask us your questions. Contact us today.