24 October 2007 4 Comments Print This Post  Email This Post

Just about eight out of every ten US households carry one of these little plastic cards that have the power to change our financial futures for better or worse. Credit cards are often seen as a bad thing and with good reason. There have been many cases where credit card companies target those who clearly have no business using a credit card, all in the pursuit of profit. However, if you’re a financially savvy individual, equipped with discipline and knowledge, you can take advantage of the many benefits that credit cards offer.

To be perfectly honest, I love credit cards and I think they are a great tool. The only thing that you must avoid is the credit card trap. This trap is one that you walk into yourself, by running up a high balance without having the resources to pay it off by the end of the billing cycle. You end up paying the minimum balance and its all downhill from there. Avoid that trap and you’ll be a happy camper. Here are eight reasons why I love credit cards and why you should too.

1. Convenience Baby!
Credit cards are so convenient. You can use them at just about any store online or offline nowadays and you don’t have to carry around all that cash. You get to avoid the ATM machines and their fees as well as reduce the clutter in your wallet. I don’t even carry around a wallet anymore. I just bring a money clip that has two slots for credit cards and my driver’s license. It’s convenient and as long as you pay the entire balance off at the end of the billing cycle, this convenience is free.

2. Rewards Baby!
Credit cards want your business. They want you to use their service (because its insanely profitable) so bad that they will give you all kinds of stuff from air fare to gift certificates, sign up bonuses and more. Go ahead and compare offers at Creditcards.com. Personally, I love my Amazon.com rewards card by Chase. I buy lots of books and other media and I basically get a free gift certificate of $25 every two to three months. I’m trying to use this card for all purchases so I can get more of those certificates by the Christmas shopping season. Chase is going to be paying for my gifts this year!

3. You Get Free Money.
Seriously, you get free money with some credit cards. I’m not talking about sign up bonuses or anything like that. Some clever individuals are using 0% limited time APR credit card offers to the fullest. Basically, what you would do is borrow money at 0% through your credit card and put that money into a secure interest bearing account, such as etrade’s 5.05% APY e-savings account. You borrow money at 0% but earn 5.05% on it and you pocket the difference. It doesn’t seem like much, but lets say you do it with 5 cards each with an average credit limit of $8,000. It can surely add up. Jonathan at MyMoneyBlog wrote an amazing guide on how to master making money from 0% offers. Check it out.

4. Interest Free Loans.
I took the #3 to the max by issuing myself an interest free business loan. Basically I started two online businesses aside from Money Socket this year that were fully funded by credit cards. I carry a balance of approx $10,000 right now, all of which is interest free and I still have a lot of credit available and I’m even paying them down with my revenues. I took advantage of the 0% offers and asked each of the credit card companies to give me the highest credit limit possible. Of course they loved the idea. This interest free loan is good for one year and if I feel the need to extend it I’ll sign up for another card with 0% balance transfers, which I will use to pay off the balance of these current cards. I am fully aware of using a credit card as a loan, especially a business loan can be somewhat risky. However, I say that if you’re going to spend the money anyway, you might as well do it interest free. For example starting an online business, buying a car, buying a new TV, etc. If you were going to buy it anyway with or without credit, you might as well get an interest free loan. Just don’t feel the urge to buy a $2000 Armani suit or a $1000 Louis Vuitton handbag just because you can get it with an interest free loan.

5. Security
Have you ever purchased a high ticket item on eBay? If you did and you sent in a cashier’s check to the seller, you’ve got guts! I know people who sent in payment and received defective goods, imitation products, or sometimes nothing at all. Even sellers with a great track record can go sour or have their account information stolen and used to trick you. Here is my rule: Use a credit card for all high ticket purchases. Why? Because you are always protected. If the seller decides to screw you over, you simply call the credit card company up and file a charge back. The credit card company, believe it or not, is on your side. They want to keep you happy so you keep on spending.

6. Helps The FICO
If you have no credit, bad credit, or even good credit, a credit card helps build credit history and boosts your credit worthiness if you use them right. What I mean is pay your bills on times! If you have a solid history of good payment patterns on three or four cards, you’re on your way to building good credit. These lines of credit and their history is essential in saving you money on some of the most expensive things you’ll ever buy, such as cars and a house.

7. Automatic Budget
A credit card can be an automatic budgetting system. Specify one card which is used for, lets say food. This can let you monitor and track your spending easily online. You can see your activity and monitor your progress. In a way, credit cards are a great organization tool as well. I don’t want to keep all those receipts when I’m trying to set and keep a budget.

8. Flexibility
Finally, credit cards offer a great deal of flexibility. This is because everyone want your business. Did I mention how insanely profitable this business is? Because of this, you can demand a lot of things from your credit card company if you give it a shot. Call them up and you’ll be surprised how many times you can get a rate reduction, a fee removed and other perks. Just tell them you are considering taking another bank’s offer and canceling your card. Trust me, they won’t want you to leave.