To Credit or Not to Credit

Bad Credit, high-interest rates, and late fees. Scary, right? I get it…

So why use a credit card?

Credit cards are revolving credit, meaning there is a maximum limit on your card, set by the bank that you can use and pay off on a daily basis. In theory, the money in your checking is the maximum amount of money you can utilize. Once is gone is gone, unless your bank charges you an overdraft fee if a transaction goes through- but hey- there is no interest. So why the risky choice of credit over debit?

Several reasons, credit cards are safer, they give you back money (in points or discounts), and they help you build your credit.

Safety

• Debit cards debit cash from your bank account right away. Credit cards offer protection against fraud.  If your card is compromised and someone uses it you have instantly lost cash. In order to get your money back, you must notice this within 60 days and alert your bank. So if you do not have notifications or check your summary every cycle you could miss this. However, a credit card is the bank’s money, if there is any scamming YOU have not lost money right away and have a longer period to dispute it. Additionally, the bank will fight harder to get their money back, which means less time on the phone and angry emails you need to send.
• Ex: I went to college in Boston, and am originally from NYC. If I forgot to reload my MetroCard before I left I would have to when I got back to NYC at the bus terminal or airport. NYC is a tourist trap, so lots of scammers. I used my debit card to pay for a MetroCard at Times Square 3 hours later I got a notification that I had bought Broadway tickets and some food, I was in BED. I locked my card and called my Bank, which resulted in my debit card being closed, and getting a new card. A similar thing happened years later, on my credit card, the charge was reversed, I kept living my life.

Money Back/ Benefits

• When you sign up for a credit card there is usually a promotion, spend $500 in 3 months and we’ll give you $150 or 50,000 points which can be used to pay for things like flights or just pay your bill.
• Reward points, there are a bunch of credit cards for what you need, NerdWallet, can help you find the one you need. I have two credit cards 1 for travel, so I get points for traveling and don’t pay fees internationally. This card has saved me lots of money and paid for an 8 day trip to Puerto Rico. I also have an everyday card which gives me 1 point for every dollar and has offers of 5 points seasonally. I use this card for groceries, dining out etc. ( I eat most of my money), and get points for spending money. I usually rack up my points. If for some reason I am unable to pay my card some month I can use the points.
• Credit cards may have deals with other companies so you might get discounts, extended warranties, or insurance for using the card. ( Early release of concert tickets if you have Ameican Express) 

Building credit

• As mentioned in the Credit 101- Getting to 850, the higher your credit the better chances of you getting good rates or the amount you want. By paying using a maximum of 30% of your credit you show banks that you can manage your money. By paying the minimum, and ideally the balance, every billing cycle you show you’re consistently good on your debt thus raising your score.
• Pro tip: your credit card balance is reported every 30 days, check your statement to see when your closing date is, if you use above 30% of your limit you can pay off anything above 30% so when your balance is reported, all is well.