Credit cards = debt, stress, money you don’t have = BAD NEWS
Isn’t that the idea most of us have about credit cards?
I’ve been through the wringer myself with putting things I couldn’t afford on cards and made the vow never to get sucked in again.
But I’ve had a bit of a re-think.
Hear me out all you get-out-of-debters before you click away :).
How to Use Credit Cards to Your Advantage
Credit cards often come with lots of perks like airline miles or hotel points, right?
What IF you only used credit cards to pay for your already-budgeted, everyday expenses that you will be paying anyway and for which you have money in the bank to cover? That is called responsible credit card use — and you can do it!
Why NOT reap the perks for money you would already be spending? That’s like earning a return on the money you spend everyday!
You’re lucky in this economy to earn even 1% in a savings account on your money.
Responsible (KEY WORD!) use of credit cards allows you to earn a return on your money, usually far above 1%.
How much would you value seeing the world with your family? I say it’s PRICELESS.
So I’ve had a bit of a re-think about my ideas regarding credit cards. Credit cards can = GOOD.
Sure, the banks want us to get in over our heads and pay high interest rates so they can profit, but let’s turn that around and instead of falling prey to their designs, let’s utilize the perks of credit cards without suffering the consequences.
Credit cards STILL make money even if we don’t carry a balance. They receive a fee every time we charge something to the card, just not from us.
I know… you’re thinking, “Sure, it all SOUNDS good, but easier said than done.” And that might be true for many of you.
Can You Engage in Responsible Credit Card Use?
If you know you cannot control your spending and are apt to put more on a card than you can pay off in the next few days — or at most in 30 days — you should NOT try to leverage credit cards to your advantage. Know thyself. It’s OK.
But, if you can be a smart user of credit cards and control your spending to only the cash you currently have, guess what?
You can outwit those banks and use the perks to travel the world — with your family no less — for almost FREE!!
But there are a few caveats:
1) Before you use a credit card for this purpose, you need a good credit score, say at least high 600s or above. That means you need to get fully OUT OF DEBT first. Get rid of ALL credit card balances.
But don’t close cards, because a big portion of credit scores are factored according to the ratio of credit extended to you compared with debt you owe. The more credit you have and the less you use, the better your score.
Credit scores also account for the age of your accounts; the older the better, so don’t close old cards.
2) ONLY use a credit card for expenses you will be paying anyway and you have money in the bank to cover. NEVER use them for something you cannot currently afford.
Believe me, it adds up quickly. So just don’t do it, not even once!
3) Pay off the balance EVERY MONTH five to seven days before the statement closing date. That keeps the credit bureaus from reporting a balance carried on the card.
This is responsible use of a credit card. IF you can follow these rules, you CAN EARN a return on your money!!
And if you love to travel, you can make that return good for frequent flyer miles, hotel points and more.
Other Perks of Credit Cards
Credit cards are very secure should your identity be stolen and someone use them to make unauthorized purchases. You will not be charged for those purchases.
You may also get insurance for car rentals, access to airport lounges, insurance for lost or damaged bags or trip cancellations, upgraded hotel or airline status and more.
One of our cards even covers some medical expenses overseas! All great perks in my book!
What to Do If You Find Yourself in Debt
If you think you can be responsible and it turns out you cannot (again, it’s OK), stop all charges to your credit cards immediately and begin paying everything from your bank account. Do NOT use your cards again until all balances are at ZERO.
I encourage you to “re-think” credit cards and their stigma. Don’t let the idea that credit cards = bad stop you from traveling around the world almost free. Please give them a re-think. I know you can outsmart those banks, taking the good and leaving the bad behind.
Whether you are working your way out of debt or have made it (or never were there to start with — go YOU!), plan for how you can responsibly use credit cards to get an even bigger bang for your traveling buck. Go get ’em!