You’ve heard the story before – the friend that got themselves into a little trouble because they loved their credit card a little too much. That friend was me.
I used to buy things I couldn’t afford just because I thought I “needed” them. I even charged a vacation to a tropical island in my 20’s (one I certainly couldn’t afford with my part time job and college tuition bills!). Month after month I would only pay the minimum balance due on my card – just to stay afloat.
Eventually, I came to my senses and stopped the madness (Thanks, Mom!). I found a credit card with a 0% balance transfer offer and worked hard to pay down my debt. Once I finally paid the bills off, I locked my credit cards in a safe in the closet and vowed they would only see the light of day again in the case of emergency. I kept my promise for the most part, only slipping up a few times around Christmas.
Years later, when my husband and I merged our accounts and he suggested using our credit card for all of our monthly expenses, I was more than a little apprehensive. He had always been a responsible credit user, but I had yet to prove myself.
We discussed it at length, created a budget and decided to go for it.
Now, I use my debit card for smaller purchases around town, but any bill or large expense goes on the credit card. We charge things we plan to buy anyway, like groceries and gas for our car. Due to our budget pre-work we are able to pay off the bill in full every month, eliminating the need to pay interest. Soon after starting this method, our cash back rewards began piling up, and visions of taking a vacation we actually COULD afford danced in my head.
I have become a believer.
I’m seeing my credit score climb to a number that gives me a better rate on future loans. I’m also able to use the data our credit card company compiles for us to readjust our budget and find opportunities to cut back our spending even more. (“We spend how much at Menards?!”)
Long story short, you may be apprehensive like I was about using credit cards. Or maybe you’re not yet convinced of the benefits you can reap by building your credit history. Keep in mind though that unfortunately, having no credit at all could hinder your efforts to secure a loan in the future (or even rent a car or hotel room for that matter!).
Starting small and only using your credit card for everyday purchases, like gas for your car, and paying off your balance every month might be a good way to begin. And make sure you do your research. Know the types of cards available to you - like reward earning options or cards with low interest rates. Take into consideration special introductory rate offers or balance transfer promotions and decide if these are the right options for you. But read the fine print – make note of any time frames and additional associated fees that may go along with special offers.
If you are rebuilding or building your credit, a secured card may be a good option. Secured cards can help you repair past credit mistakes or build your non-existent credit history, not to mention they can help ensure you don’t spend more than you can actually afford.
If you have questions about the additional perks of owning a credit card, speak with your personal banker. They can help you find the card that best fits your needs and you can start building your credit today!