You’ve probably heard to “beware of credit cards.” There are risks if you don’t spend responsibly, however, using credit cards can actually be a smart choice. Here are some reasons we love our Partners Visa® credit cards and how we use them.
Let’s start by looking at how credit cards got a bad rap. When you have a good credit score, it can be easy to get more and more credit cards. You may have an emergency that causes you to bust out one of those cards. Or you might buy something you can’t afford without really thinking about it because you have all that available credit. And you may even think getting all those cards is a smart move because you’ll have a lot of unused credit on your credit report. Keeping a high percentage of unused credit can be good for your credit score. Having a lot of credit cards with high limits just sitting there can be tempting.
If you only make minimum payments, it’s probably not a huge deal. But it can be easy to rack up debt on those cards and get yourself in way over your head. If you lose your job or have your hours cut, making those monthly payments may become a challenge. You could find yourself falling behind and hurting your credit. Or you could find your monthly payments add up so much that it’s hard for you to save for your future or make necessary purchases.
So now that we’ve talked about why you may have heard to avoid credit cards, let’s look at why we think using credit cards can be a smart choice. We’ll also give you some of our best tips.
First, if you don’t already have a card, start with one that meets your needs. A secured card is a great option for someone who’s just starting or needs to rebuild after some credit mistakes. You keep a shared account that you use as collateral and your credit limit is the same as the amount in that account. You could also choose a credit card to earn points or cash back for your purchases, which also offer benefits like tap-to-pay, mobile wallet capability, and fraud protection.
No matter which card you choose, our number one tip is to only make purchases you can afford to pay off that month. Some use their rewards cards for their daily expenses, including utility payments, groceries, and car expenses. Then, they use autopay to pay the full balance which eliminates the temptation to just let the balance roll. Therefore, they can use their paychecks for something more fun!
Credit cards also offer some other benefits over your debit card. One of the big ones is protecting you from online fraud. Use your credit card instead of your debit card to make online purchases. That way, if you realize someone used your card, it won’t affect your checking account balance. Visa’s Zero Liability Policy fully protects both credit and debit cards. However, it can take a few days to get any charges reversed. It can be very frustrating waiting those few days for your checking balance to recover. Credit cards also provide easy tracking of expenses you might need for reimbursement or tax purposes.
So, what do you do if you’re in over your head with credit cards? The first step is to contact your lenders to work out payment options. No one likes to make that phone call, but you and your lenders want you to succeed at paying off these debts. Negative items, such as late payments, stay on your credit report for a long time. When you work together, you retain control over your finances, and you keep from hurting your credit over time.
The second step is to review your options. A secured credit card can be a great way to rebuild your credit and show your growth. You could also consider debt consolidation with a personal loan, a home equity loan, or a home equity line of credit. When you’re paying off your debts, consider different types of payment options. You could pay off smaller debts first, or pay off the high interest rate debts first, whichever makes sense for you.
If you have more questions about how to manage your credit, we’re here to help. We offer education sessions on Partners Facebook Live that are open to anyone and completely free, or schedule an appointment to see how you can benefit from having a credit card.