Don’t assume that credit cards are going to make you worse off financially.
- Many people think that credit cards will worsen their financial situation due to high interest rates.
- Credit cards can actually be a financial tool that helps you get rich if you use them right.
- Credit cards can earn you rewards and help you build credit.
When many people think of credit cards, their first thought is not that a card can help their financial situation. Instead, credit cards have gotten a bad rap because high interest rates and low minimum payments can leave people stuck in credit card debt for years.
The reality, however, is that if you use your credit cards wisely by paying them off on time and in full before interest charges accrue, your cards can actually make you rich. Here are three key reasons why that is the case.
1. You could qualify for a sign-up bonus
Many credit card companies offer generous sign-up bonuses for new card members. These can be worth hundreds of dollars. They often come in the form of cash back, points, or miles that can be redeemed for travel or merchandise.
If you can get a bonus of $500, or more, just for using a credit card to spend what you need to anyway, you’ll inevitably end up richer since the card company will literally put more money in your pocket.
Of course, you’ll want to make sure you don’t spend more than you should to earn the sign-up bonus, and that you don’t end up with a balance after loading enough on the card to meet the minimums needed to earn that. But as long as your efforts to earn the bonus don’t leave you drowning in debt, there’s no downside to getting free money.
2. You could earn generous rewards
The best credit cards also offer great rewards that you can earn over time.
For example, you could earn 1% to 6% cash back when you use credit cards for common purchases like gas, groceries, and travel. You can also earn points or miles for purchases, depending on the type of card you choose.
If you get a percentage of all your spending back each month, naturally, this also makes you richer, especially if you choose to invest the money you make or the money you save on vacations when you earn free travel by using your card.
3. You can build credit
Credit cards are a great tool to help you improve your credit score and build a strong credit history. Since your credit score is important in so many aspects of your life, this is a huge advantage to using a credit card, and a great way that cards can help you improve your financial situation.
Paying your cards responsibly and not overcharging them should help you get the kind of credit score that allows you to borrow at a low rate. You can use your good credit to buy a home with an affordable mortgage or start a business with a low-interest business loan, both of which can help you build wealth over time.
Many companies also check your credit when they decide to offer you a job. This means that responsible use of your credit card could literally help you land a higher-paying job that puts you on the path to riches.
The key, of course, is that cards can make you richer if you use them responsibly. So be sure to acknowledge its benefits, but also know that there could be serious downsides to not committing to paying your balance in full and paying your bills on time.
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