Using credit cards, and the value in doing so, is one of the most debated things between families and friends, and there is a never ending discussion about advantages and disadvantages going on daily on the internet.
Two things are for sure: 1. It is nice to have readily available credit for things that come up in our daily activities and 2. It is not nice to have to pay a monthly credit card bill, especially when there is a high interest rate.
It all just comes down to what type of person you are. If you are a person that is responsible with your credit cards then it is probably a good idea to have one (or a few) of them. If not – well then don’t plan on getting any.
Here is a pretty good guide for using credit cards – 3 things to use them for and three things not to.
Using Business Credit
Purchasing assets, new equipment, outsourcing, and hiring new employees are all good reasons to use your business line of credit. In business, the golden rule for using credit cards, or going into any kind of debt, is to go only into debt when it will increase your revenue. It is also important to avoid co-mingling, or using your business credit card for personal expenses.
School Books
It is said that there are three types of loans that you can feel good about: Business loans, home loans, and school loans. This is because you have pretty good chances (as long as you are careful, and put in the work) to get a return on your investment. School books, and to some extent supplies, are the same but on a much smaller scale. They will help you get the job complete, and you can even sell school books at the end of the semester to get some of your money back.
Home Essentials
Buying things at home that can save you money when you don’t have the cash at the moment is something that is considered using credit responsibly and wisely. This includes things like coffee makers (save $2 + a day), electric timers for things like lights and air conditioning units, blenders, and many other kitchen appliances.
You shouldn’t use your credit card as your free pass for impulse buying. Gas, cash advances, and personal pampering are all cases in which you should leave the plastic in the wallet. You should also stay away from these three things when it comes to using your credit cards:
Alcohol
Weekends can get pretty expensive, and having a credit card can make your monthly credit bills huge due to irresponsible binge drinking at parties and bars. Not only this, but a couple weekends at the bar can be extremely expensive, especially after you have had a few drinks. These are the nights where it seems like you don’t have a care in the world and money doesn’t even exist. Unfortunately this is not the case, and you can end up with a terrible morning and an even more terrible month after a few weekends of late night spending.
The Clearance Rack
The orange sticker can look pretty alluring sometimes, and it can lead to a lot of unnecessary purchasing. Stick with your essentials – it is better to spend a lot of money on one item that you will use all of the time, rather than to spend a lot of money on a bunch of little items that you will rarely use. Usually items that are on the clearance rack are there for a reason – nobody wants them! There are some exceptions to the rule, but if you are going to spend your days collecting items at the clearance rack then you should do so with hard earned cash.
This also includes sites like eBay and bid cactus, where bidding competitions can turn into wars and you can end up spending more money than you thought you would to start off with – not to mention the shipping costs!
Tickets
This includes traffic tickets and lottery tickets. Both don’t look good on credit card bills and both will make you look irresponsible in the eyes of a credit card company. Lottery tickets can also become addicting, and are for the most part, useless, while traffic tickets make you look reckless.
When it comes to using credit cards, as a rule of thumb just stick to what you absolutely need. Buying more than the essentials is usually a bad idea, and buying things that will give you a return is when you are really being responsible. There are many different guides and ways to use a credit card responsibly; it all just starts with you and knowing your limits. And of course, avoiding using credit whenever you can is always a good idea.