Kelly Robertson
Most folks don’t think of credit cards going along with one’s personal finances, but we tend to disagree with that statement. As long as you’re using your credit card in a responsible way, it could be a tool to actually help you manage your finances. In fact, there are a few ways how a credit card can directly affect your (financial) life, including:
1. Keeping records
Those credit card statement records double as a tool to help you keep up with your spending habits. Going through them once a month can assist you in making a budget and cutting corners across the board. And since each entry includes the merchant name, you can more easily organize yourself, and eventually start avoiding some places where you know you can easily spend more than you should.
2. Tracking category spending
Related to the previous point, record keeping helps with your budgeting efforts with some credit card companies even automatically categorizing purchases for you. From there, you get to learn where big chunks of your money goes and act accordingly.
For instance, you could realize that eating out accounts for a big chunk of your income and could decide to do something about it — like bring your own meals to work. Or you may notice there are some subscription services you are no longer using on your credit card statement, and may decide to cancel them.
3. Paying (less) taxes
Another related point — keeping records also helps you track charitable contributions and other deductions, as well as business expenses. These are the things you should not forget to mention in your tax report, as they can decrease the amount you owe to the government. Take notes, add qualifying deductions to the spreadsheet or some software you’re using for that, and take it from there.
4. Helping you deal with cash flow
While we advise our readers to pay their credit card bills in full at the end of each month, we do understand that sometimes that is not an option. For those moment when you need to buy something quickly and you don’t have a cash at hand, a credit card can be a life-saver. Say your car is broken, or your computer dies out (and it’s out of warranty) — you need to react as soon as possible.
More importantly, however, are cash-flow issues many people face in the period between the actual purchase and their credit card due date. You can use those days, or even weeks, to come up with additional money and payoff that purchase you had to make on the spot.
5. Earning rewards
This part presumes that you are paying your monthly statement balances in full; if that’s the case, you get to earn credit card rewards that come in the form of cash-back or points. We tend to prefer the latter, but we also know some folks that like the good ol’ cash so they can use it for just about anything, not just travel and overpriced gadgets.
Again, in order to benefit from these rewards, you shouldn’t carry any balance from one month to the other, cause otherwise — any reward you may earn won’t justify the cost of interest that would incur on your balance…
