As you likely know, or have experienced yourself, when credit cards are used irresponsibly they can lead to financial ruin. That’s why they receive a lot of attention for the negative impact they can have on personal finances. For those who utilize credit cards responsibly, however, they can be an integral tool in a consumer’s financial toolbox. Let’s take a look at a few ways a credit card can actually help improve your finances.
They can be your emergency fund. Financial experts are always saying you should save three to six months of your expenses in an emergency fund, recent polls show that many Americans simply aren’t able to save enough for unforeseen expenses. A credit card ensures that emergencies won’t leave you unable to pay your rent, childcare or other necessary expense.
They protect against identity theft. If you perceive using credit cards as unsafe, think again. Credit cards are specifically designed with fraud protection that simply isn’t available using cash or even debit cards. If your card is stolen, card purchases can be immediately halted with a simple phone call to the customer service line.
They can actually boost your credit score. This one might seem counter intuitive, but here’s why it’s true. Lenders look for evidence that you pay your debts, so establishing a long, positive credit history will actually contribute to higher credit scores over time. The older a credit card account is, the more positively it will affect your credit score – so long as your history also includes making your payments on time consistently.
If you’ve been holding off on using a credit card for fear of negative financial impact, consider the above benefits. Of course, it’s always best to pay your balance down to zero each month. If you have the discipline to do so, credit cards can be a useful financial tool.
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