When it comes to personal finance and credit cards, there are generally two types of people – those who believe you should never use credit cards and those who think that when used wisely and paid off each month, credit cards can be a way to get more for the money you’re already spending. If you’re on the fence about how to spend your paycheck, this edition of TRIO offers three reasons that you might forgo cash and start using credit.
One of the best benefits of using a credit card is the built-in protection that credit card companies can offer. Most credit cards offer purchase protection meaning the credit card company will help protect you (and your credit score) against loss or theft. The Fair Credit Billing Act is a federal law that is designed to protect consumers from unfair billing practices. Under this law, you have 60 days from the time you get your credit card bill to dispute any charges. The act also stipulates that your credit card company has two billing cycles to investigate the complaint.
A few summers ago, I used my credit card at a hotel for any incidentals that I might incur during my stay. When I got my bill later that month it had more than $3,000 of unauthorized charges on the statement. Had I used my debit account at the hotel that would have drained my bank account. But, because I used a credit card, I was able to call my credit card and make a formal complaint. I didn’t have to pay those charges during the investigation, and the company quickly issued me a new card number. Within a few days, the charges were erased and the matter was closed. The best part about it was that the entire process took less than 10 minutes of my time.
A credit card score is a three-digit number that represents how likely you are to repay a loan or credit based on your previous payment history. The Fair Isaac Corporation, commonly known as FICO, is the largest and best-known company that evaluates credit history. FICO scores are based on previous payments, amount you owe, length of your credit history, new credit and your credit mix. Scores range from 300 to 850, and the higher the score you have, the more trustworthy you are considered to be in the eyes of lenders. Your credit score can make a significant difference in the interest rates for any loans you have. High credit scores generally result in lower interest rates since you’re seen as less of a risk.
Equifax, Experian and TransUnion are the three largest credit bureaus in the U.S. Thanks to the Fair and Accurate Credit Transactions Act of 2003, you have the right to a free annual report from each of these companies. Visit annualcreditreport.com to access the only government-granted free credit report. So, what does this have to do with credit cards? Well, on-time payments of your credit cards help build your credit history. Other ways to improve your score include paying your bills on time, paying off debt or keeping your balances low, not applying for credit that you don’t need, not closing unused credit cards, and disputing any inaccuracies on your credit reports.
If you’re already using credit cards, do you know if you’re making the most out of them? Many cards offer incentives and rewards for using their cards. Credit card rewards come in a variety of categories, with the most common falling into cash back, points or miles. Cash back rewards generally don’t offer actual money. Instead, cash back cards typically allow you to redeem your rewards as a credit to your account. Cards that reward in points offer incentives for using your card to gain access to the reward program’s online shopping mall. Points can be generally be redeemed for products or to purchase a gift card from some of your favorite stores. Cards that offer travel rewards allow you to use points to buy airline tickets or make hotel room reservations, depending on the card you have.
Credit card rewards are a great way to get added benefits for what you’re already spending. Not sure which rewards are best for you? Take a look at Nerd Wallet’s picks for credit card rewards. This site does a great job of breaking down the reward types, pros and cons of rewards offered by each card and analyzing the fine print of each card. A bonus is the recommended credit score for each card.
If you’d like to know more about success when it comes to smartly using credit, sign up for our short course, Credit Card Rewards. This class will teach you how to use credit cards to your benefit for things like free cash back and world travel. Whether your credit score is 850 or 350 this class will show you how to improve your credit score and use it to your advantage. To register call 405.377.3333. To find out about more courses like this sign up for our monthly e-newsletter. View all of our upcoming courses in our digital catalog.
Cara Adney is the Marketing and Media Relations Coordinator at Meridian Technology Center.