When it comes to using a credit card, most people fall into two categories: using the card for everything or using the card for nothing. Many credit cards offer rewards like points, cash back, or discounts when you use them, making them more enticing. But those rewards come with a price – an interest charge when you don’t pay the card off in full each month.
So, should you use your card for everyday expenses or not? Here are some pros and cons:
- Card Rewards – We’ve mentioned them already, but let’s think about this some more. If you’re going to have to buy gas or groceries or other regular expenses anyway, you may as well get some points or cash back, right? You’ve hopefully already budgeted for these items and can easily use a credit card and then pay it off immediately, so go for it and enjoy those perks!
- Credit History – Using your cards regularly and then paying them off helps to boost your credit score. It shows you’re a responsible borrower and you know how to handle your money. If you’re getting ready to apply for a loan, this can help.
- Auto Payments – When you set up auto payments on your credit card for your fixed monthly bills, you are less likely to be late or miss a payment.
- Overspending – Using a credit card for everything can make it harder to keep track of your expenses and stick to your budget.
- Debt – This is an extension of the last point. If you routinely spend more than you plan to, you may find yourself unable to pay the balance off in full each month. When that happens, debt can grow.
- Interest – Borrowing money isn’t free. If you carry a balance, even a small one, interest will get charged. That means you’ll end up spending more than you think on those every day purchases and you’ll negate the points and rewards you earned by using the card in the first place.
The bottom line is credit cards are a wonderful tool if you have the discipline to use them properly. Though you may have periods where you have to spend more, if you can get right back on track as soon as possible, you’ll get the benefits of building a strong credit history.
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