My Blog, Your Money

Let me start this post off by saying that I am a credit card fiend.  I use them as much as I can (even to buy packs of gum).  So I thought it would be good to share some of my thoughts on credit cards.  Without further ado, here are…

My Top 5 Reasons to Use Credit Cards

1.      Rewards- Many credit cards offer rewards of some sort.  1% cash back is pretty standard, but you can also get higher percentages or other forms of reward such as gift cards and frequent flier miles.  I used to get 5% cash back on gas until it was scaled back to 3% for whatever reason.

Here’s 2 sites that might be useful when comparing rewards cards:

o       http://www.creditcardflyers.com/

o       http://www.cardoffers.com/

2.      Convenience- With plastic, you don’t have to worry about bringing enough cash or going to an ATM (as long as you have enough available credit).  All you have to do is tote around that little card.  And should you misplace a card, all you have to do is call up your credit card company and cancel it (hopefully, before a thief makes some fraudulent purchases).  With cash, that money is mostly as good as gone.

3.      Purchase tracking- Every month, I get statements for each of my credit cards listing all of my purchases.  I use this as a handy tool to analyze my spending habits and think about ways to control my expenses.  If you don’t want to wait for your monthly bill, you can also check your credit activity online.  Many sites also offer ways to export the data into formats for you to use with certain financial programs such as Quicken and Microsoft Money.

4.      Credit history- Handling credit cards responsibly will boost your credit score which is a metric used by lenders when deciding whether to extend loans and at what rates.  Having a good score will earn you more favorable terms and save you a ton of money.

5.      Other Perks- Credit cards come with many perks that many cardholders are not aware of such as purchase protection and extended warranties.  It’s a good idea to take a look at the fine print of your card agreement so that you can take advantage of these hidden perks.

Here is a CNBC clip of Ramit Sethi of I Will Teach You To Be Rich detailing credit card perks.  Also, here’s another post of his entitled 3 credit card perks you have (but probably don’t know about).

Honorable Mention: Earn more interest- Since you have to pay your credit card only once a month, you are given many days to actually pay for many of your purchases.  If you use place this cash into an interest-bearing account, then you’ll be able to earn interest on that money.  For me, I keep my cash in an ING account and then just transfer over the money to my checking account when I need to pay my credit cards.  The interest might not be a significant amount of money, but it’ll add up over time.

Stay tuned.  My next post will be about the pitfalls of credit cards.