They say money is the root to all evil and credit cards just might be money’s most successful partner in crime. According to Experian, a major credit reporting agency, an estimated 61% of Americans carry at least one credit card. There’s no doubting the credit card’s allure. Due to high interest rates, fees, and the temptation of easy money, credit cards have earned a bad reputation for being an expensive temptation. But do credit cards fail to possess any redeeming qualities?
Credit Cards: What’s the Use?
From bartering between neighbors to purchasing items on layaway, using credit to buy goods and services existed long before the invention of the little plastic cards in your wallet. Originally, a gesture of goodwill and trust between small local businesses and its townsfolk was enough to do business. However, over time, borrowing on credit has taken on new and broader dimension. While the way we use credit has changed, the purpose hasn’t changed much at all. Maybe you’ve used a credit card to:
- Pay for an unexpected repair or expense.
- Cover a temporary financial deficit until your next paycheck.
- Protect against the failure of moderately expensive purchases such as an appliance or a computer.
- Rent a car or hotel room or purchase an airline ticket.
- Enjoy a special night out with family or friends.
Not all these examples are ideal, but when in a financial pinch, a credit card comes in handy.
How to Use Credit Cards Better
We’ve all encountered that person who brags about paying for everything in cash. But if you ever plan to rent a car or a hotel room, purchase concert or airline tickets, it may not make sense to banish credit cards altogether. Maybe you can make using credit cards less expensive if you consider the following:
- Don’t use credit cards that carry an annual fee.
- Make at least the minimum payment if not paying the bill in full each month.
- Pay your bill on time.
- Watch for hidden fees for services you don’t use or are offered cheaper elsewhere (For example, credit card payment protection, credit monitoring, or identity theft protection).
- Use the credit card only if you will have the funds to pay the bill when it arrives.
- Set up an emergency fund or savings account to cover unexpected or discretionary expenses.
- Use credit cards that offer rewards that you would actually use.
With a little discipline and planning, credit cards can be a supporting character rather than a nasty villain in your financial story.