Applying for and using a credit card can be scary for some people. That’s because there are a lot of warnings about high credit card interest rates and how long it takes to pay off a balance.
While these warnings have merit, the reality is that if you use them wisely, there’s no real reason to avoid using a credit card. In fact, there are three big reasons why you shouldn’t be afraid of them, but rather consider adopting them.
Credit cards are a tool. Like most tools, they can be used for good or they can harm if not used responsibly. If you understand how to use cards the right way, they can actually help you build a good credit score that opens tons of doors for you.
If you want your credit cards to help you build credit, you need to make sure you keep the amount you charge well below the credit limit you have. If you use more than 30% of your available credit, it could hurt rather than help your credit score. You will also want to pay on time.
These two things alone can go a long way in helping you develop a strong credit history that encourages lenders, landlords, and other businesses to do business with you on favorable terms.
2. You can set up autopay to ensure you never run out of balance
One of the main reasons people are afraid of credit cards is that it can be very expensive to keep a balance on them. But you absolutely don’t have to carry a balance. It is not necessary to accumulate credit, and it can be avoided if you are careful with the use of the card.
The best way to make sure you never get stuck with interest on your credit card is to set up autopay so your cards are paid in full. This means you need to make sure you have enough money in your bank account to pay the bill without an overdraft. But if you track your spending or only use your card for limited purchases to control how much you’ll have to pay, it should be easy.
3. You can earn rewards without going into debt if you stick to your budget
Finally, if you stick to a budget and keep your charges on your card below the level you can repay, you’ll avoid debt and interest charges while also being able to earn rewards. The points, miles or cash back you earn by spending on your cards can be very valuable, especially if there are no interest charges to offset them.
Now, there are certain situations where credit cards are a problem, like if you really can’t trust yourself not to charge them a fortune that you can’t pay back. But, if this is your situation, then working on your underlying financial habits might be the best course of action rather than just giving up on credit cards and missing out on all the benefits they can offer.
Check out The Ascent’s best credit cards for 2022
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