Credit cards are good

Credit cards ARE good! But credit card debt is bad.

Many people I know fear to use a credit card. They believe that by having a credit card they will inevitably accrue debt. If this sounds like you, then let me reassure you that you are losing out on not having a credit card. I hope to change your mind.

The most important thing to do upon getting a credit card is the following. Before you spend a single penny on that credit card make sure that you call up your credit card company and set up a direct debit to pay off the balance on the card in full each and every month. This will ensure that you never miss a payment and thus never incur any charges or penalties or accrue any debt. It's that simple!

Spend money on credit or debit?

If you are spending money in cash or on a debit card then you are missing out on all sorts of benefits. Spending on credit cards as opposed to any other medium gives you added protection on your purchases. There is a little know agreement between you and your credit card company such that if there is damage to good, or the goods are not up to a sufficient standard then you have protection from your credit card company such that in many instances they will cover any losses.

The brilliance of a credit card is that many credit card companies will pay you cashback or offer you exchangeable reward points (and what do points make...) just for spending on the card. I receive 1.25% cashback on all my spending. Furthermore, there was a 3 month bonus period when I first got the card when I received 5% cashback. That's £5 in my pocket for £100 that I would have spent anyway! I have already built up £110 in cashback for which I expensed no extra effort to obtain!

Credit cards delay cash outflow

Finally credit cards allow you to delay your spending by up to a month (since the direct debit will come out of your account only once a month). This has a small but brilliant effect of allowing you an extra months interest on your account!

So credit cards are good! Credit card debt is bad. Make sure you pay off the debt in full each month. Make the process easier through direct debit. Don't spend past your credit limit or else you will incur charges. Always make sure that you have the money in your account already before spending on a credit card. Follow these simple rules and you can have a credit card.

In fact, follow these simple rules and then definitely get a credit card.

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John @ Coughupthedough said...

Hmm ,Good post,Learn something by this post.Thanks for sharing.

Thomas @ Expertwager said...

yeah we know credit card is good but credit card debt is bad. it is better to avoid credit card debt.

Joe said...

Providing you have your direct debit in place and you're disciplined with your finances they certainly are useful; the cashback on some is fantastic! Applied for the AMEX recently myself, 5% for three months is too good to pass up!

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