Credit Cards! To use or not to use?

Credit Cards have many uses and can be beneficial and useful, but they can be harmful and detrimental to your financial wellbeing. It’s a double-edged sword; on one side, we get the benefits of deferred payments for a month, points to be used later, online purchase functionality, and the protection of buying products and services. On the other side, the interest rates are high if you carry a balance, it goes back to the date of purchase, which removes the benefits of the one-month deferral, and you’re buying with future money that you might not have.
How to take advantage of the credit cards.
As an accountant, I believe that most debt is bad debt. When I say that, I mean that debt for the sake of investing is acceptable debt, all other debt is taboo, but that’s another story for later. Let’s talk about the benefits of credit cards and how we take advantage of them.
1. Never carry a balance on your credit cards. If you are going to incur debt, get a line of credit (LOC) and pay off the credit card on time to reduce and avoid unnecessary interest.
2. Pay your credit cards on time. Paying your credit cards on time prevents a charge of interest from the date of purchase. When using a LOC, the interest starts from the date of payment instead.
3. As you can see, interest is your enemy. Negotiate or find a credit card that has a low interest rate in the event a payment is missed or late. This will minimize your exposure of too much interest.
4. Take advantage of the points offered by the credit card companies. This means you need discipline to ensure you make your payments on time and don’t carry a balance on them.
5. Plan your purchases on the credit card. If you know, you will buy a TV soon, shop around for the best price and save money to make your purchase. When you have the money, buy the item on your credit card, and then pay it promptly. This will save you from impulse buying. We are an instant, self-gratifying society that can’t wait for our material items.
6. The purpose of a credit card has changed over the years. They replaced in store credits and made the credit independent so that it can be used anywhere. I have one credit card for points and a second credit card mostly for emergencies in the event they don’t accept the type of card I have for my main purchases.
In summary, don’t keep a balance on your credit cards but use them to take advantage of the points. This requires discipline to spend only the money you have. Keep good spending habits brought to you by your friendly neighborhood accountant.
Keep it simple!

Assorted credit cards