Credit cards can be handy, but they aren’t right for everyone. If you’re responsible with your finances and are looking for ideas to be even better, these credit card tips are for you.
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I spend a lot of time deciding whether to share this or not. It has worked really well for me, but I don’t want anyone to get a credit card because you think I’m telling you to. You know your own finances and habits best.
A credit card won’t get you out of debt, solve your budget problems, or make you money. Like any good budgeting tips, this one only works if you are the one doing the work!
Why I got a credit card
When we bought our first home, the bank said it would be really helpful if we had a line of credit. We didn’t have any credit cards at the time and apart from a few store cards, had never used them previously either.
Essentially the more credit you have available, the more responsible you look, but the bank also said that we shouldn’t apply for a credit card right before applying for a mortgage loan because it would affect our credit scores. Ugh, money is hard.
A few months after we closed on the house and moved in, I got a home rebate credit card offer in the mail from my bank. Now, I get credit card offers almost weekly, so I generally just toss them. This one sounded like it could be a smart credit card tip, though, so I went into the bank to ask them about it.
The credit card offer was this: Cash back rewards go directly to the mortgage principal. For the first year, the reward was 5% for groceries and gas and 1% for everything else. After that, it dropped to 1% for everything. In the first year, the home rebate put $350 towards our mortgage. Each year since the amount has been between $300 and $400 per year.
My credit card tips
Essentially, I’m using my credit card as an extra filter. I have a monthly budget that I stick to, but I use the credit card to make those purchases and then immediately pay them off. Credit cards can’t be used on other debt, so I can’t pay our mortgage, car payments, or student loans with it.
1. Don’t spend money before you have it.
This might seem like a no-brainer, but it’s easy to spend money when payday is tomorrow. You never know when that paycheck will be a day late, the bank or post office will be closed for a holiday, or something else might go wrong.
2. Stick to a budget.
No matter what your credit card limit is, don’t think of that number as how much you can spend. Create a budget based on your income and stick to it. It’s easy to overspend when you know that you have $1,000 available on your credit card. If you don’t have $1,000 in your bank account to pay it off – or that money needs to be saved for next month’s bills – you will only get into trouble.
3. Pay off the card weekly.
If you let the card carry a balance, you’ll have to pay interest, usually in the ballpark of 25%. If you always pay it off before the due date, you won’t. Create a routine for paying bills and zeroing out the credit card, whether that’s weekly, biweekly, or monthly. Every Friday I sit down and pay bills and balance my budget. I use this spreadsheet to organize it all.
4. Shop around for the best deal.
When you decide you’re ready for a credit card, shop around. Compare the rewards, fees, and other details to find the one that fits your needs. Every bank, store, airline, etc. has a card these days.
5. Read the fine print.
Like any financial obligation, you need to know what you’re signing up for. When is your balance due? What happens if you pay it late? How do you earn rewards? Are there things that aren’t included? How much is the interest rate? What happens if your card is stolen?
Should you get one?
In the long run, these credit card tips aren’t life-changing. If I keep the credit card and the house until the mortgage is paid off, it would save us maybe 3 to 5 years. That isn’t nothing – it comes out to a 10 to 15% savings, which is several thousand dollars. But it is definitely a long game since the standard mortgage is 30 years.
For us, it provides a safety net for a very expensive worst-case scenario, helps us maintain good credit history, and lets us build a little extra equity in our home.
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