Don’t assume that credit cards are going to make you worse off financially.
- Many people believe that credit cards will make their financial situation worse due to high interest rates.
- Credit cards can actually be a financial tool that helps you get richer if you use them correctly.
- Credit cards can earn you rewards and help you build credit.
When many people think of credit cards, their first thought is not that a card can improve their financial situation. Instead, credit cards have gotten a bad rap because high interest rates and low minimum payments can leave people trapped in credit card debt for years.
The reality, however, is that if you use your credit cards wisely by paying them off on time and in full before you accrue interest charges, your cards can actually make you rich. Here are three main reasons why this is the case.
1. You may be eligible for a sign-up bonus
Many credit card companies offer generous sign-up bonuses to new members. These can be worth hundreds of dollars. They often come in the form of cash back, points or miles that can be redeemed for travel or merchandise.
If you can get a bonus of $500 – or more – just by using a credit card for expenses you have to do anyway, you will inevitably end up getting richer since the issuing company is literally putting more money in your poached.
Of course, you want to make sure you don’t spend more than you should to earn the sign-up bonus – and end up with a balance after loading enough onto the card to meet the minimums needed to earn. this. But as long as your efforts to earn the bonus don’t leave you drowning in debt, there’s no downside to getting free money.
2. You could win generous rewards
The best credit cards also offer great rewards that you can earn over time.
For example, you could earn between 1% and 6% cash back when you use credit cards for everyday purchases such as gas, groceries and travel. You can also earn points or miles for your purchases, depending on the type of card you choose.
If you get reimbursed for a percentage of all your expenses each month, that naturally makes you richer too, especially if you choose to invest the cash back you get or the money you save on vacations when you earn free trips using your card.
3. You can build up credit
Credit cards are a great tool to help you improve your credit score and build a solid credit history. Since your credit score matters in so many aspects of your life, it’s a huge benefit to using a credit card — and one of the main ways cards can help you improve your financial situation.
If you pay your cards responsibly and don’t overcharge, that should help you get the kind of credit score that lets you borrow at a low rate. You can use your good credit to buy a home with an affordable mortgage or start a business with a low-interest business loan, which can help your wealth grow over time.
Many companies also look at your credit when deciding whether to offer you a job. This means that your responsible use of your credit card could literally land you a better paying contract that will put you on the road to riches.
The key, of course, is that cards can make you richer if you use them responsibly. So be sure to recognize their benefits, but also be aware that there could be serious downsides if you don’t commit to paying off your balance in full and paying your bills on time.
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