We’re so used to hearing about how we need to get rid of credit card debt, and how credit cards are evil, that we often forget that they can be great financial tools.
Yes, it’s important to pay off credit card debt. But once that debt is paid off, should you just cut up your cards and move on? That is one option. However, with a little planning, you can incorporate credit cards into your budget, boost your credit score, and maximize your spending.
Get the Right Credit Card
First of all, it helps to get the right credit card if you want incorporate your spending into your budget. A rewards card of some kind is your best bet. With a rewards card, you can use your everyday spending to your advantage.
[Check Your Credit: Don’t Guess. Know.® Get your free credit report and score. No credit card required.
One of the best choices is a straight cash back rewards credit cards. Points and miles cards often require you to earn tens of thousands of points/miles before they do any good. The cash value of points you earn is generally rather low.
On the other hand, a cash back card is always efficient. You earn a percentage of each purchase back, and you don’t have to worry about whether you have enough miles to qualify for a free roundtrip flight, or whether the large amount of points you have amassed is enough for a $25 statement credit. Cash is cash, and a cash back card can be the best way to go.
Choose a card that offers a high percentage of cash back. One popular option is a cash back card with rotating categories. Every quarter, a different category earns 5% cash back, while other purchases earn 1% cash back. You can also find cash back cards that offer tiered cash back for different categories, rather than rotating.
Spend as Usual; Pay with Plastic
Next, spend as you normally would. Instead of pulling out cash or the debit card, though, pay with your cash back credit card. Use your rewards card for groceries, gas, and other purchases. The trick is making sure that you purchase only what you would normally buy.
This strategy can even work when you make larger, irregular purchases. Save up for the purchase as you normally would, but when it’s time to pay, use your rewards credit card.
In order to avoid paying interest on the card, though, you need to pay off your balance each month. Your cash back rewards can’t compete with a 13.99% APR. If you don’t pay off the balance each month, the value of your rewards is overcome by the interest you pay. You have to integrate your credit card usage with your regular spending plan.
[Check Your Credit: Don’t Guess. Know.® Get your free credit report and score. No credit card required.
Positive Results
Not only will you earn cash back for making everyday purchases, but you can help boost your credit score. The responsible use of credit can lead to a higher score. Your higher credit score can mean lower interest rates on mortgages and auto loans, as well as lower insurance premiums and other non-credit advantages.
Maximize your money all around by using your credit card as part of your budget. You might be surprised at how much you can earn in a year — and how much your good credit score will save you on top of your earnings.
Using Credit Cards as Part of Your Budget was originally featured on Quizzle Wire
Quizzle.com is the easiest way to get a complete understanding of your credit. Visit Quizzle.com to get your free credit report and score. No credit card or social security number necessary!