Most people associate Credit Card debt with something evil and that is disastrous for your finances. After reading up on the topic and researching different people’s opinions it turns out that credit card are really not that bad (if you know how to use them). I will go through some tips to take advantage of credit cards so that you can use this tool in your favour. I will also touch on a few mistakes that people often make with credit cards.

Good debt vs Bad debt

Not all debt is the same, there is the debt which can help you improve your personal finances and then there is debt that only drags you down. Consumer debt is what I refer to as bad debt. This is when people take out a loan for normal spending, this is often caused by poor money management. An example would be someone that buys an expensive pair of shoes although they cannot really afford it and just puts it on the credit card. Another example is people that buy an overly-expensive car and decides to finance it ( often with super high interest rates). Buying a car is definitely a big financial commitment and most people will not be able to pay it without getting a loan, on the other hand, people often get big and expensive cars they don’t really need because they are able to get them on finance and don’t have to fork out the money now.

Build your credit score

One of the great things that credit card can help you with is in fact your credit score. Credit scoring is a way to measure the credit worthiness of a person. Lenders will often check your credit history before giving you a loan, a mortgage or open accounts with them so it if very important you keep this in check. Having a credit card and managing it correctly can help you improve your credit score because it shows that you are able to take on a line of credit, make timely repayments and manage it well. In the UK there are  a few different credit building cards designed for younger people who don’t really have a credit history and are just starting out.

A good credit will help you get a mortgage at a more favourable interest rate, which will save you thousands if now tens of thousands of pounds in the long run.

Cashback and rewards

Another great perk of credit cards is the opportunity to accumulate different rewards every time you spend money with the credit card. Some card give you Avios points which will help you save money on flying, some other cards give you cashback on your purchases and other cards give you shopping vouchers for you to use! All for just spending money that you would anyway.

Tips to manage your credit card

• Pay off your balance in full: this way you will never pay a penny in interest charges
• Only use it for normal spending: use your card for money that you would be spending anyway.

Final words

Credit cards are a great tool but they need to be managed well. If used improperly these cards can make you rack up hefty interest charges without even realising it. Make sure you know what you are getting into when you sign the contract and know that

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