You might not realize it, but credit cards are a big part of everyday life for most people. Credit card ownership has increased over the past three decades. Credit cards are a convenient way to manage their finances and build credit for many people.
With that in mind, it’s important to know when and how to use your credit card. If you don’t have a credit card and are thinking about getting one, here are four signs that you need a credit card.
You Need Cash back or Rewards
Cash back programs are a great way to save money. Most cash-back programs let you earn cash back on your purchases, which you can then redeem for cash or merchandise. There are many different types of cash back programs.
Some reward you for using your card to make everyday purchases, like gas and groceries. Some will give you extra cash back for paying your bill on time. If you don’t have a cash back card, now is a great time to get one.
You can chase down a sign-up bonus, which can be as high as $600. If you don’t have a rewards card, you can still get a handful of rewards without a sign-up bonus. That said, cash back cards are a great way to build your credit, as you can use them to pay off high-interest debt.
You Want to Build Your Credit
You can build your credit by consistently making on-time payments. Credit cards that offer rewards or cash back can also help you build your credit. These cards will have an account that tracks your credit score and allows you to see your FICO score.
If you currently don’t have any credit, or if your credit has never been great, you can get a card that will allow you to build your credit. Some cards will even let you have an account with them so you can see where you stand.
You are Currently Overpaying Interest
If you are currently paying interest on a loan or credit card, it’s time to switch. This can be a sign that you are paying too much on your current debt and could use a credit card to help you get out of debt.
If you have a house, car, or other loans, the information on your current loan documents will tell you what your interest rate is. It’s important to note that the interest rate is not the same thing as the rate you are paying on your loan. Your interest rate is the amount you are paying every month to borrow that money. This includes money you borrow from a bank or credit union and money you borrow from a loan shark.
You Have an Old Bank Account or Credit Card
If you have an old bank account or credit card, your credit score will be much lower than it would if you had a new account. This is because the only information on your old account is the name on the account, not the person. Opening a new account will help you build credit, but you will also save a ton of money in interest by paying off your old account before closing the old card.
Now that you know when you need a credit card, you are one step closer to your financial freedom. According to the experts at SoFi invest, the key is to start with a small amount and build your way up to a large amount.
It is time to apply for a credit card if you are not currently using one. You don’t have to open one with a big company as you can get a card from almost any bank. Most banks will offer low-interest credit cards for people with low credit scores.