Everyone is getting all up in arms about credit card use nowadays, how they can entrap you with high interest rates and a never-ending cycle of paying off bits and pieces — to no avail. Honestly, if you use credit cards to finance a life that is way beyond your means, then yes, that will happen to you. However, like anything else, credit cards can be a great tool. You just have to be smart about how you use them.
My mother made me apply for a credit card as soon as I turned 18 (well, OK, she didn’t make me — I always wanted one of my own). It had a very low credit limit — $500 — but the point was to begin to build my credit history. That way, when I got older and would have to apply for those pesky things called student loans and have credit checks run for apartments, I would have a good credit score and avoid rejection.
Due to the fact that the limit was so low, it really behooved me to pay off my balance each month. All I really paid for at the age of 18 was gas for my car, CD, and some clothes, anyway. When I headed off to college, I found that more and more credit card companies would send me pre-approved applications. It was then that I learned the value of the credit card. I already knew I had the discipline to not spend more than I knew I could pay back in full (barring any emergencies).
I saw that there were different classes of credit cards: some offered points toward different goods, kind of like when you go to arcades on the boardwalk. Others offered cash back depending on how much you spent per month. Yet others offered to give you points toward any travel — cruise, gas, car, airplane, etc. — you happened to go on. Most of these didn’t charge you an annual fee to use the card (there are some, particularly the higher end ones from American Express, which charge you a fee per month — or yearly — just to have one).
So today’s tip of the week is simple: Find a credit card with a rewards system that makes sense for you. And, do NOT pay an annual fee. There are plenty of cards out there that do not make you pay one and offer rewards, too. Don’t fall into that trap.