Credit cards have something of a negative reputation when it comes to personal finances and the reasons why are definitely valid. The 2019 Experian Consumer Credit Review revealed that the average American owns four credit cards. For many, credit cards have very high annual fees, can damage one’s credit score, and inspire overspending. However, when it comes to managing your finances effectively, there are clearly some positives about using credit cards – especially when they are in the right hands. So with that said, here are some ways to manage your finances using credit cards.
- Great source of emergency money
It isn’t uncommon for many people to carry around the money they need for daily expenses, but never enough for an unforeseen expense. A credit card can give you quick access to cash during an emergency. For instance, as a credit card owner, you never have to worry about whether you have adequate cash on hand if you are stranded late at night and need to lodge at a hotel. This way, you can immediately tackle the finances of any emergency until you have the time to transfer the cash from your bank account.
- Build credit
It is estimated that 16% of Americans have bad credit. Thankfully, one of the biggest perks of owning a credit card is that it helps build good credit over time. Whether you are a fresh graduate or trying to make ends meet for your family, you will likely encounter situations where your credit score can help or prevent you from securing certain things. Some of these include car loans, rental agreements, and mortgages. As a credit card owner, all you have to do is keep your account in good standing to get a good credit score. This score will increase your chances of getting approved for the above-listed products. You can find the best credit card for you on platforms like Compare Credit, even with bad credit, but you may have fewer options.
- Convenience while traveling
It is no secret that traveling in America or abroad costs a lot of cash. A credit card offers a convenient way to fund these travels, so you don’t have to carry huge sums of money. In addition, a credit card can help you enjoy the best exchange rates while abroad. These rates are typically better than what banks in your destination are willing to offer you. However, it is prudent to be cautious of potential foreign exchange fees your credit card may charge.
- Rewards for spending
Most credit card companies provide some reward when you spend, whether a set percentage cash back or miles you can leverage for future travel. The money you will receive from cashback credit cards is tax-free and directly credited to your account once a year. However, a cashback credit card is only worth it if you can fully pay your credit card bill every month, or the interest will exceed any rewards. Also, most reward credit cards offer more points when you shop at partner stores. Therefore, you might need to be loyal to a specific shop to enjoy more rewards.
