How using credit cards can help you meet your financial goals

If you’re not using your credit card to help meet your financial goals, you’re not doing personal finance right. While it’s important to use credit cards wisely, they can have many benefits when you do. In fact, wise use of a credit card can be one of the most effective ways to build your credit history and save you money on interest rates and deposits.

Once you learn to use credit cards right, you can use them to save money on purchases big and small, track your expenses, and earn valuable rewards. You can benefit from purchase protection and sleep easy at night, knowing you have a source of quick cash in an emergency. Just make sure you use your credit wisely, to avoid racking up too much debt or paying high interest rates.

Save money on your purchases

Did you know that credit cards can help you save money on major purchases, and smaller ones, too? Well, they can! Savvy consumers save money on major purchases by taking advantage of introductory interest rates that can be as low as zero percent. If you know you need to make a major purchase, such as a new living room set, a new refrigerator, or something else big and expensive, you can give yourself time to pay it off in installments and save yourself the interest by taking advantage of one of these interest-free credit card deals. Just be aware that these zero interest grace periods are often temporary, so make sure to pay off your balance before the normal interest rate kicks in. 

You can also use a credit card to save money on smaller purchases. Let’s say something you need goes on sale, but payday is a week away. Use your credit card to take advantage of the limited-time offer, saving money, and then pay off the balance when you get paid, before you’re charged interest. 

Track your expenses

One of the primary benefits of credit cards is that they make it so easy to keep track of your personal expenses, since you receive an invoice every month that offers a detailed record of your spending. This can help you make or tweak your budget, and it’s especially helpful for those who aren’t so great at saving receipts or tracking expenses the old-fashioned way. 

Earn rewards

Rewards credit cards are popular; 55 percent of credit card holders have a rewards card. If you choose your rewards credit card carefully, you can save a lot of money on perks like hotel rooms or airline tickets. For many consumers, rewards card airline miles make recreational travel possible. But airline miles aren’t the only reward you could earn.

Also up for grabs are points that can be redeemed for discounts on hotel rooms, gas, gift cards, and other prizes. Or, you could simply choose a cash-back card that allows you to reclaim a small percentage of your purchases.

Build and maintain your credit

Not having much of a credit history can be just as bad as having poor credit when it comes time to apply for a mortgage or car loan. Even if you have excellent credit, you have to keep using your credit in order to maintain your high score. Responsible use of a credit card allows you to do this. 

It’s not hard to maintain your credit score using a credit card. Just charge a small amount every month and then pay it off in full by the due date. Try not to carry a high balance — carrying a balance of more than 30 percent of the credit you have available can be a red flag to potential lenders, since it indicates you have a habit of living beyond your means.

Take advantage of purchase protection

One advantage of using a credit card to make purchases is that you’re guaranteed an extra level of protection if you never receive merchandise you ordered, or if a merchant refuses to take back defective merchandise. When this happens, check with your card issuer. Most card issuers will handle disputes on behalf of their customers, and you should be able to get a refund you deserve even if the merchant refuses to hand it over.

Use your credit cards wisely

While credit cards can be a useful financial tool, you should avoid carrying too many credit cards or racking up too much debt. Try to always pay off your balance in full each month. If you can’t pay off your balance in full, you should pay more than the minimum payment, in order to pay off your card sooner.

When you use credit cards right, they can increase your purchasing power and make your personal finances easier to manage. Responsible credit card use can save you a lot of money, especially when you use a rewards card to accumulate airline miles or other perks. So, if you haven’t made credit cards a part of your personal finance plan, it’s time you did.