Sometimes putting purchases on a credit card has a negative connotation by appearing you are going into debt, but that is hardly the case at all. The truth is that as long as you can pay off your balance when the statement arrives next month it only helps your credit. It also frees up cash for emergencies just in case. There are a few important reasons why credit card use is important.
Missing Out on Free Money
Rewards cards such as the Costco credit card offers huge cash back incentives for using, so even figuring conservatively at 2%, if you spend $2,000 a month on the card for all purchases and bills, that could be $40 coming back to you, added up over the course of the year and could add up to almost $500 in the form of a check. Other cards that use as points could return rewards in the form of gift cards, airline miles, or free hotel rooms.
Not Building up Credit
Believe it or not when you use your credit card you are building up your credit, so keeping cards open and not using for purchase are not doing anything to help your score. Making purchases and paying off the entire balance by the statement due date will show lenders you are responsible, not to mention the credit bureaus. The trick is to not spend too much and not be able to afford to pay off the entire balance when it comes due and you could find your score getting lower
Makes Purchases Difficult
If you are in the market for a home or auto purchase, not having enough credit could make the mortgage and auto loan process difficult. There are many factors that go into the mortgage process, but credit history is a large part in the decision making process, so not enough credit could ruin chances to capitalize on low market rates and pay premium prices. Auto loans are more relaxed compared to a home purchase, but those rates could sky rocket as well and be stuck with unfavorable terms.
Unable to Dispute
If you have made a purchase for an item or service that did not meet your expectations you are entitled to dispute the charge, and if you pay in cash or debit card you may be out of luck. With a credit card, the card issuer will work on your behalf to dispute the charge.
Though if you think you are going to be unable to even meet your monthly minimum card payments then you need to start considering alternative options for cash. Money isn’t just going to appear out of thin air and magically pay your bills. Failing to pay at least the minimum can result in a detrimental hit to your credit score. Consider the advantage of Texas title loans for any temporary liquidity needs. Borrowing against a vehicle you own is much wiser than risking any late or non-payments because of a temporary lapse in cash. Don’t get hung up on the interest payments, because the fallout from a bad credit score can cost you much more in the long run.
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