Owning a credit card allows people to swipe without an instant drain on their bank accounts. It is easy to spend money too quickly and become shocked at the end of the month when there is not enough cash to pay off the current balance. This causes high-interest debt to carry into the next month. Credit cards are simply not a good fit for many.
But say your budgeting skills are on point.
You’re stacking savings and have never had an issue with credit card debt, or any amount of debt for that matter, and want to know how to use it efficiently as another tool to build wealth. For instance, you are in a field of work where employers check your credit score pre-employment, or you simply want to save money on groceries.
The below strategy is for using credit cards responsibly:
- Use the credit card responsibly. Responsible usage varies by person: this could be for groceries only, the electric bill only, or can be used to purchase everything. Be honest with yourself. Credit cards are not for everyone, and that is ok. Many are just too busy to manage a credit card, and it is not worth the risk of slipping into debt.
- Pay off the current balance at the end of every week or the moment the purchase hits the account. There is no need to wait until you get your statement balance to pay your credit card off. Never carry a balance into the following month. If paying the current balance at the end of every week seems like a daunting task, a credit card may not be for you.
- Use the cash-back option when you accumulate points as a statement credit or cash to your account. Cashback is favored over other point systems because it doesn’t encourage a cycle of spending. The results are that you get a discount on your purchases by using the cash-back option for your points. Also, the consistent low % usage can increase your credit score.
Don’t forget to activate and pay attention to the increased cash-back categories every month. Many can save you an additional 5% on the items you needed anyway.