I’m not a big fan of credit cards.
However, there are a few times in the month or year when it makes perfect sense to use them. Understanding your credit card options and how they function is crucial if you want to enhance your financial wealth.
How should you use your credit cards?
My personal preference is to leave all my credit cards at home and only use one to pay all of my online bills. I have it setup this way to avoid double charges, or incorrect payments affecting my cash flow.
For example, let’s say that your cable company charges your account twice unintentionally you’re now short on cash. Depending on how quick a company is at refunding your money it can take up to 3–10 business days to get your money back! The upside of using a credit card in this scenario is that your cash flow won’t be affected.
For this very reason, you should only use credit cards for true emergencies. Not too long I finished paying off $5,500, and I wouldn’t want to go through this painful process again.
If you haven’t finished paying off all of your credit card debt, then you should work on this first. However, it can still be beneficial for you to understand the different credit card options available.
Everyone’s situation is unique so it will be up to you to decide which credit card you will use if any.
Different types of credit cards
Below are the most common types of credit cards. From every category, each credit card is subject to annual fees and interest rates.
Standard Credit Cards
Standard credit cards are used for general purposes.
Typically, these type of cards carry no rewards and you’ll have to meet the unique requirements of the lender.
Secured Credit Cards
Secured cards are also known as pay-as-you-go cards.
When you initially open a secured credit card account you’re required to make a deposit ranging from a few hundred dollars to thousands of dollars. Your credit limit is then determined by a percentage from your initial deposit. This can range from 50%–100% varying from each lender.
Although secured credit cards carry a higher annual and interest fee, they are perfect for you if you’re looking to rebuild your credit.
Specialty Credit Cards
Specialty credit cards are usually offered through business partnerships, affiliations, and major retailers.
A small portion of your purchases will go towards the intended organization. These credit cards are great for helping other organizations.
Reward Credit Cards
Reward credit cards have reward programs that are intended to motivate you to spend more.
Different types of rewards cards include Airline, cash back, points, and premium. However, if you’re not careful a card’s annual fees, and interest can easily offset any perks.
Credit cards can be a convenient tool to have, only if they are implemented correctly.
When used for the wrong reason you can easily begin to accumulate massive debt. I personally wold recommend that you leave your credit cards at home and start paying for everything in cash. However, there may be some circumstances where utilizing a credit card can help enhance your financial wealth.
For example, if you have no credit then opening a secured credit card may be right for you. It always boils down to the one that has the least fees and provides you the best benefits.
Some people like to use their credit cards strictly for rewards, but I’ve found that I always ended up spending more than anticipated. After all, the intention of reward credit cards is to convince consumers to spend more. If you have the discipline to not overspend and pay off your credit card each month then a rewards credit card may suit you best.
If you catch yourself overspending or having a hard time getting rid of your debt, then you should consider eliminating credit cards completely. It’s important that you become aware of the different types of credit cards available so that you make better financial decisions.
The road to financial freedom is a long on, but with persistence and a creativity, you’ll surely reach your financial goals.
Knowledge without action is meaningless.
I challenge you to utilize your credit card to enhance your financial wealth whether that means using it to pay your bills or to leave it out of sight.
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How are you currently using your credit card?