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A smiling woman with a credit card.
Applying for and using a credit card can be scary for some people. That’s because there are a lot of warnings out there about high credit card interest rates and how long it can take to pay off a balance.
While these warnings have merit, the reality is that if you use them wisely, there’s no real reason to steer clear of using a credit card. In fact, there are three big reasons why you shouldn’t be afraid of them, but instead should consider embracing them.
1. They’re a tool that helps you build credit
Credit cards are a tool. Like most tools, they can be used for good or they can do harm if they aren’t used responsibly. If you understand how to use cards the right way, they can actually help you build a good credit score that opens up tons of doors for you.
If you want your credit cards to help you build credit, you should make sure to keep the amount you charge well below the credit limit available to you. If you use more than 30% of your available credit, this could hurt instead of helping your credit score. You’ll also want to pay on time.
These two things alone can go a long way toward helping you eventually develop a solid credit history that encourages lenders, landlords, and other companies to do business with you under favorable terms.
2. You can set up autopay to be sure you never carry a balance
One of the key reasons people are afraid of credit cards is because carrying a balance on them can be so expensive. But you absolutely do not have to carry a balance. It’s not necessary to build credit, and it can be avoided if you are careful about card use.
The best way to make sure you never end up getting stuck with credit card interest is to set up autopay so your cards are paid in full. This means you need to make sure you have enough in your bank account to pay the bill without overdrafting. But if you track your spending or use your card only for limited purchases so you control how much you’ll have to pay, this should be easy.
3. You can earn rewards without getting into debt if you stick to your budget
Finally, if you stick to a budget and keep your charges on your card below the level you can pay back, you will avoid debt and interest charges while also being able to earn rewards. The points, miles, or cash back you accrue while spending on your cards can be quite valuable — especially if there are no interest costs to offset it.
Now, there are some situations where credit cards are a problem, like if you truly cannot trust yourself not to charge a fortune on them that you can’t pay back. But, if that’s your situation, then working on your underlying financial habits could be the best course of action rather than just swearing off credit cards and missing all the benefits they can offer.
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