Pros, Cons, and Tips for Credit Cards

1. Establishing Credit. What does this even mean? Well once I wanted to buy an expensive sofa with a no interest credit card being offered by Art Van furniture. I ended up paying cash for the sofa because I was denied the card.

Although I had no credit cards they would not allow me to have one. Why? No "revolving" accounts worries credit companies. So I got a credit card with a small limit (400$) and paid it every month to establish credit which makes me seem more trustworthy in the eyes of credit companies. (check your credit report for more information).

2. Higher Credit Score: The longer you have revolving accounts and established credit the higher your score will be. Again check out your free credit report once per year to see where you stand. Finance a loan for a car, home mortgage, or business with established credit.

3. Rewards: Spend money that you were already going to spend and get money towards things you like. If you are going to buy all your college books on Amazon then why not get something back eventually? They offer 3 points for every dollar spent on their site, and 1 point for every dollar spent elsewhere.

Rewards cards are available in all types from travel miles to dining or even paying back student loans. Get a rewards credit card that matches your lifestyle here.

4. Emergency Money: Not getting paid until Friday, but need a tooth pulled on Thursday? Random machine rejects your debit card? Credit cards are great to have around just in case a machine doesn't take your debit card (over time they get worn down or demagnatized).

CONS:

1. Bad Credit: If you forget to pay your bill or neglect to do so then your credit score will fall much faster than it rises. Even renting an apartment requires a credit check these days. So do not spend more than you can afford. Keep checking your free credit report annually for your score.

2. Interest: Some cards rise as high as 20% or more interest. Be careful when choosing a card because of the interest rate. If you will pay every month before the interest is added to your account, then it doesn't matter. However, if you only pay the minimum balance due then interest is added to your account every month, not annually.

3. Theft or Lost Card: Having a credit card is great until it's stolen. Be careful and report all stolen credit cards. There is a number in the initial credit card information packet you will receive or online to call. Have the number available at home outside your purse or wallet in case of lost credit cards.

4. Hidden Fees: Watch out for that annual fee many cards will have in fine print. Be sure to get the card that is right for you (tons are available with no annual fee). Some good companies are visa, mastercard, and chase (but there are many other reliable companies to choose from).

5. Changes in Interest Rate or Limits: Since I got my card several years ago the interest has continued to rise. You are allowed to deny changes made by your credit company such as a raise in interest or your limit (which could be just fine if you have self control over your personal spending, but if you want to keep it low to avoid temptation it is possible). They may not tell you this, but it's possible on occasion to stop the interest change. Contact the company for more information when your "terms of service" change. Ask if you can deny the new changes, and if not it might be reason to cancel the card. Just know that "revolving accounts" are best left open at least five years to boost your credit report score.

Tips:

Never use a credit card on a public computer. These could have malicious software that will log your information.

Pay the card off monthly. If you spend more then you can afford to pay off every month your interest will become too high to ever pay off. Paying monthly just means no interest accumulates.

Example: Let's say you spend 1000$ on a TV with a 20% interest card. When the bill is due you pay 150$. Interest is added on to the new total at the end of the month. You now owe 1020$ because there is a balance of 850$ and they added 170$ (20% of 850) to the bill. At this rate you will continue to owe more than you pay.

Always be sure to get your card back after a transaction. Sometimes you might forget or the cashier may forget to hand you back the card. Just double check you have the card every time you use it.

Protect the card. In some restaurants people have walked past tables and taken a photo of a credit card with their cell phone. Always place it in a spot where others cannot access the number.