Take Charge: How to Use Your Credit Card to Your Advantage
Posted by: Staff Writer | Jul 15,2007
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It is important to your financial future to build yourself a solid, positive credit report with a high FICO score. You may not know this, but credit cards are a wonderful asset when you are trying to accomplish that task. Many people think of credit cards and imagine high interest monthly bills and astronomical annual fees. However, there are several ways to make your credit cards work to your advantage.
Using Your Credit Card to Your Advantage: Starting SimpleThe easiest way to reap some reward from your credit cards may also be the most important. Simply making a small purchase each month and paying your balance in full each billing cycle is the best way to build strong credit. A history of paying your bill on time and in full will raise your FICO score and look great on your credit report.
Using Your Credit Card to Your AdvantageThere are other ways to make your credit cards work to your advantage. Consider these advantages uses:
- Security: Having a credit card around just for emergencies is a wonderful idea. If a medical or financial emergency should occur, you have the funds to take care of whatever may crop up. It gives a certain peace of mind to know that things can be taken care of.
- Making Money: That's right. Your credit card can make you money. Many credit card customers are transferring the balance from one card to zero percent interest cards. Some are transferring their balances on cards with no transfer fees to a savings account or checking account that pays a hefty interest rate. If you're the type who can remember that the initial money is just a loan and you should only spend the interest payments, you can make yourself a nice little chunk each year doing this.
- No Cash Needed: This is a big advantage, especially when traveling. Everyone worries about losing cash or having it stolen when on vacation or traveling. Using a credit card instead saves you from that hassle and takes away the worry of having to pay for someone else's illegal purchases as well.
- Responsibility: Having the enhanced level of personal responsibility that comes with being able to own and maintain a credit card can only help you. It opens other financial doors to you as well. It sets you on the path to financial stability.
Credit Cards Work to Your Advantage by Deterring DebtCredit cards can also act as a deterrent to debt. This happens when you consider the finance charges tagged onto your purchases when you don't pay your balance in full each month. If you take your annual percentage rate and divide it by 12 months, you'll find the periodic rate that is applied to your outstanding balance each month. Your monthly finance charge is found by multiplying the periodic rate times the outstanding balance. Once you add that number to your purchase and see what you're actually paying for the item, it isn't always as appealing as it first was.
Credit cards can be a valuable financial tool and credit builder when used with restraint and responsibly. Using them to your advantage is easy and pays off ten fold in the long run.
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