Credit Cards: The Good and The Bad

For many people, credit cards are just a part of normal life.  Most people have one or even several and it’s something that they don’t even really think about.  Other people avoid them at all costs and preach the dangers and pitfalls of being in debt.  So who is right?  Well, that totally depends on your own personal situation.  As with most things in life, there are pros and cons to owning credit cards.  You simply have to weigh them out and figure out which way best applies to your life.  To help you out, we’ve made a list of good and bad points when it comes to credit cards.  

The Good

When used the right way and handled responsibly, credit cards can help you in your financial journey.  

  1. Most credit cards come with a rewards system.  These rewards can be anything from a certain percentage of cash back to free airline tickets to a free cruise.  It just depends on which credit card you choose.  Many people who play the “rewards game” correctly will pick the card with the rewards they deem most enticing and will use that card for every purchase they make–even bills.  They will use it like a debit card and then pay the balance off in full every month, thereby ensuring that they rack up the most points to get to their reward faster.  If you are an incredibly responsible person, this method could work for you.
  2. Using a credit card the right way will help you have a good credit score.  Good credit scores are usually needed if you want to purchase a house or finance a car.  The higher the score, the better.  You only get great credit scores if you handle your credit cards responsibly. 
  3. Credit cards can be useful in emergencies.  While the best way to plan for an emergency is to have an emergency savings fund set up, sometimes that just isn’t a reality for a lot of people.  If a true emergency does arise and you don’t have enough cash to cover it, credit cards can come in handy to cover the difference.

As you can see, there are some benefits to using credit cards the right way.  But what does it mean to use cards responsibly?  Here are a few tips:

  1. Pay off the balance in full every month. 
  2. Pay all your bills on time–never late. 
  3. Only apply for credit cards that are needed.  Here’s a hint:  You probably don’t need 10 different cards.

If you feel like you can do those three things, then using a credit card for the benefits might be a good option for you.

The Bad

Now let’s talk about the downside of having credit cards.  As much as some people go into owning credit cards with good intentions, a lot of them just can’t handle the temptation of them and it gets out of hand very quickly.  Here’s a list of what can happen when having a credit card goes wrong:

  1. It can have a negative effect on your credit score.  If you are late on your payments or have too many cards with high balances, it negatively affects your credit score.  A lower credit score can disqualify you from future loans for cars or homes.  Oftentimes, if your score is really low, you won’t even be able to rent. 
  2. It makes your interest payment even higher.  If you are ever late on a payment, your interest rate can skyrocket on some cards.  If they don’t trust you to pay them, you will suffer the consequences. 
  3. Having access to credit tempts you to overcharge.  Some people possess a lot of self-discipline and some don’t.  Those who don’t are the ones who fall prey to overcharging on their credit cards.  They get to a point where they can’t pay the balance off every month, which leads to extra interest charges and can start a very dangerous slippery slope into massive debt. 
  4. It puts you in unnecessary financial distress.  If you consistently overcharge, you will become financially distressed at some point.  If you have 5 cards and you can only make the minimum payment on each, it can get overwhelming.  Some people may be so far over their heads in debt that they can’t even make the minimum payments.  That’s when panic can start to set in.

To make sure these pitfalls do not happen to you, it would be wise to avoid the following credit card traps:

  1. Not paying your bill on time. 
  2. Only paying the minimum amount on each monthly bill. 
  3. Having too many cards open at the same time. 
  4. Overcharging and spending money you can’t pay off in full every month. 
  5. Exceeding your credit limit on your card.

It’s extremely important that you weigh the pros and cons to credit cards before you start opening accounts.  When used well, it can be a nice tool in your journey towards financial success, but it can go wrong very fast.  It’s wise to think about how self-disciplined you are before delving into the world of credit cards.  It’s up to you to choose wisely.

3 Easy Ways to Save Money

Saving money can sometimes seem like an impossible task.  It seems that no matter how much money you make, there are always those months where none of it ends up in savings.  Saving money is important for a secure financial future, and even if you live paycheck to paycheck, there are still ways you can work saving a little into your budget.  Keep reading for three no-brainer ways to save a little bit of money.

1.) Automate When Possible
When you get your paycheck, set up your direct deposit in a way that some of your check automatically goes towards your savings account–even if it is as little as $5.  That way, you don’t even see the money to contemplate spending it.  You’ll have a peace of mind knowing that your money is building up in your savings account without you having to think about it.  It also helps with budgeting, because you know exactly how much of your income is going towards savings every month.

2.) Keep Your Change
Whenever you use cash, don’t just throw your change in your car cupholders or the bottom of a purse…put it in a specific location.  If you were to put every little bit of change into a jar for a few months, you would be amazed at how much extra money you can accumulate.  Instead of it being strewn about all over your house, you have it in a central location and can see that it is building up, which motivates you to save even more!  While this method won’t exactly make you rich, it certainly can’t hurt to put away every extra cent possible.

3.)  Cut Your Costs
Sometimes saving money is as simple as not spending as much money on certain things.  Think about all that you consume in a typical month.  Can you cut back on anything?  Maybe you could get rid of your cable and just rely on streaming services like Netflix and Hulu.  You could start meal planning everything you eat so you won’t buy extra items at the grocery store.  If you subscribe to any magazines or online subscriptions, you could cut those out for a little while.  Whatever you do, the point is to save the money you’ve just freed up.  Take that $10 from your magazine subscription and put it in savings.  Did you spend $50 less on groceries this week?  Great!  Put it in savings.  You got rid of that $100 cable bill?  Awesome, now go put that in your savings.  This method only works if you put the money you have saved into your savings account.  Otherwise, you will just end up spending it on something else frivolous.

As you can see, saving money doesn’t have to be some daunting task.  You can find little ways to save money everyday if you look for them.  Doing something little each day to work toward your savings goals will compound into big savings over time, and before you know it, you will be reaching your financial goals!