Four Reasons to Buddy Up with a Credit Card
Combined with responsible spending, these tips could help improve your financial wellness.
Presented by Member One Federal Credit Union
High-interest rates, nasty fees, or the inability to pay back debt—all can leave you feeling glum when it comes to credit cards. Cheer up! Credit cards don’t have to be your worst financial enemy. If you educate yourself, you’ll discover how befriending your credit card, while spending responsibly, could actually benefit your overall financial health.
Build and/or improve your credit. Are you planning to get a loan for a car or a home? That loan will depend on your credit score. By using a credit card and making monthly payments (or better yet, paying off the entire balance each month), you’re helping to establish good credit. You’ll also want to consider your credit utilization ratio—the amount you owe compared to your credit limit. Keeping this ratio low, usually below 10 percent, will make you more appealing to lenders.
Maximize the value of your dollar. If you use your credit card wisely, rewards can be a good way to maximize the value of every dollar you spend by earning cash back, points, or miles that you can later redeem. Why not benefit from purchases you’re already making? Just be cautious—don’t charge more to your credit card just to earn a certain reward, such as an airfare ticket or hotel stay. This could lead to significant debt if it gets out of control. One way to keep track of spending is to use your credit card for specific things like groceries and gas.
Keep your budget in check. Credit cards can be a great way to consolidate your debt. You can save yourself some money over time by rolling all of your debt onto a single credit card; however, make sure the card you’re putting debt onto has a lower interest rate than your other cards. This could make your life simpler by paying one bill each month instead of several, and the lower interest rate could help you save money.
Protect your money. With credit and debit card fraud on the rise, using a credit card as opposed to a debit card could help protect you and your funds. Debit cards are linked to your checking account, so fraudsters could drain your account quickly if your card is compromised. With credit cards, you have the advantage of fraud protection. Review your credit card provider’s fraud protection policy to learn more. Another great feature of credit cards is purchase alerts that notify you when your card is used.
Credit cards don’t have to be a foe. With a little willpower and a bit of know-how, they can help you achieve financial ease and security.
Join Member One here each month for more money-saving tips and financial advice! Be sure to visit their website, www.memberonefcu.com, for more info on their products and services. Member One Federal Credit Union is federally insured by the National Credit Union Administration.