Credit cards can be valuable tools in your financial journey if you use them correctly. About 20 years ago, everyone told us how evil credit card companies are. I still remember they continually advertise to discourage people from having credit cards in my financial literacy class. Credit card companies make consumers spend a lot of money and impose debt with very high-interest rates. Although it is partly true, a credit card can offer significant benefits if you correctly use them. Unfortunately, there are so many credit cards to choose from, and they offer so many different benefits. Depending on your spending habits, they can be used for travel, grocery shopping, electronics, etc. In my experience, credit cards have helped me develop a much more robust finance profile. It also helps me to achieve my investment goals. Here are reasons why you should have a credit card.
1. Jumpstart your credit score.
If you are turning 18, I recommend starting with a credit card with a low spending limit. But make sure to pay off that credit card every month. If possible, at least two times every month. An open longstanding credit card account can help to build credit. A high credit score helps you get mortgage approval for homes, cars, and businesses. Compare someone who opened their account one year ago to someone who has had their credit card for 30 years. The person with the credit card from 30 years ago will at least have 100 points above the first person. On top of that, never close a credit card. Leave it open if a credit card does not require an annual fee. Anytime when you close off a credit card, your score will drop. Keep your utilization rate low, and you will find your score improving quickly.
2. Earn rewards.
A good credit card can help you to earn rewards, given that you do not overspend and leave credit card debts on the table. Each credit card has its unique benefits and sign-on bonuses. Make sure to read each credit card’s fine prints and reviews before applying. There are credit cards that require annual fees, like the Sapphire series from JP Morgan. But some cards do not have yearly fees like the Freedom Unlimited. In general, you should be able to earn points for every purchase you make. Then you can use those points to redeem your daily expenses. For example, I am a frequent restaurant diner and traveler. I have the Chase Sapphire Reserve (or you can get the Amex Platinum card). It costs 550 dollars for its annual feel. But I can earn 3x the number points when dining out and traveling abroad. I also get free traveling benefits like the Global Entry and airport lounges. At the same time, I also have the Chase Freedom Unlimited, which allows me to earn another 1.5x the point when I am making regular purchases online (vs. 1% on the CSR). The key to reaching reward points is not to overspend to get those points. Instead, use the money you are already spending and maximize the value of a dollar.
3. Start leveraging with the bank to invest.
We want a high credit score to be able to leverage the power of borrowing money from the bank. It is no secret that credit cards can help you to achieve this. After several years of opening your first credit card, you will notice that the bank will provide you with services such as pre-approval for car and home mortgages. They will also increase your credit limit and provide different services such as financial advisors for your portfolio. They will invite you to their VIP list and offer excellent business deals. And all of these benefits come from owning a credit card. Many investment opportunities will come if you accumulate enough wealth and build a trustworthy profile with the financial institution you work with. My family made a multi-million dollar business in the 1990s only because they started using credit cards and diligently paid off all their debts.
4. Simplify your wallet and daily routine.
The credit card has made our life so much easier. It can be used wirelessly on your phone, and it minimizes the hassle of carrying a lot of cash in your wallet. Gone are the days when we have to line up in a bank and get a cashier’s check or deposit money into an ATM. However, this is a double-edged sword. With the convenience of a credit card, you are more likely to spend money that you don’t have. And this is how a credit card company gets you as a customer. They are trying to encourage you to boost the economy by buying items you don’t need. I keep track of my financial statement very closely every month to avoid unnecessary spending on items and online subscriptions. This takes time and diligence when it comes to personal finances. But I enjoy having the freedom to buy anything off my phone without carrying hundreds of dollars in cash (although I recommend taking money with you).
The building of your credit journey is long. But with diligence, you can also achieve a successful financial portfolio. Thank you so much for reading my blog; please feel free to comment, like, and subscribe if you enjoy content like this. Have a great week!
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https://www.referyourchasecard.com/18a/16S32UAHIP
For my list of self-improvement items, check out the books that I recommend,
Rich Dad, Poor Dad: https://amzn.to/39d33lT
The 7 Habits of Highly Effective People: https://amzn.to/3M7JM3K
The Emporer of All Maladies: https://amzn.to/39Gj2ca
Gifted hands:https://amzn.to/38kp1mL