If my father has taught me one thing in my life, it is how to properly use a credit card. Credit cards have a terrible connotation, but they are not evil if used properly. Don’t spend what you don’t have, pay off the card in full every month, and exploit rewards to the fullest.
A lot of people claim that they prefer to use debit cards because that ensures that they don’t spend what they don’t have. In reality, someone can check how much they spent on their credit card just as easily as their checking account online. The difference is that a bank account charges ridiculous fees every time an account is overdrawn, but a credit card will just charge a percentage of the amount that isn’t paid.
I have heard a rumor that leaving a balance on a credit card helps improve your credit score. Do not leave a balance on your card, it does not help your credit score and costs money. One part of increasing your credit score is having more credit available to you than you use. Part of the argument for why the credit card companies want you to carry a balance is that this is how they make money. Credit card companies make money by charging a fee to retailers every time you swipe your card. The primary reason interest rates on credit cards are so high is because it is unsecured debt. Unlike an auto loan or mortgage, the bank has no collateral for the loan.
Credit cards are an extremely lucrative business and because of that, companies are willing to pay you a lot to use their card. You can earn hundreds of dollars in sign-up bonuses just for starting to use a particular credit card. In addition to sign-up bonuses, many cards offer miles and cash back for continued use. If you do the majority of your spending on credit cards this could mean hundreds or thousands of dollars each year in rewards. Personally, I will sign up for just about any no-fee credit card that offers a sign-up bonus. I have a couple of credit cards that I use for just about everything. A credit card can be a great financial tool if used correctly.