Credit Cards - Great Financial Tool for the Disciplined

Have credit card been always beneficial for you?

Based on the responses to this question I have seen, it appears that for most people credit cards are tools that they have either chosen not to use or have used incorrectly for the majority of their lives.

It really is no surprise to me though as we can see by the recent economic disasters that a large percent of the overall population, from politicians to day laborers and everyone in between, seem to not be able to organize finances very well.

For the sake of this article, let's start off with what a credit card is and what it should be used for.

A credit card essentially gives the cardholder the ability to take out a loan at any given time up to the amount that is given to that person based on their previous financial history. The credit card issuers give the cardholder the cash in advance of payment with the assumption that they will pay back the debt incurred at some point in time. In return for loaning the cardholder the money, the credit card issuer usually charges interest, which in some cases can be rather high. An additional bonus for the cardholder is that many credit cards these days pay between 1-5% cashback on money that is borrowed using their credit card.

Now keeping that in mind, for the financially responsible person a credit card should be viewed as a tool that can not only give them the ability to extra cash at any point in time(should they need it), but can actually earn them money at a substantial rate based on today's standards.

For financially irresponsible and naive people, credit cards are generally viewed with a negative connotation. They associate credit card use with overspending and/or believe that by paying everything in cash is the smart thing because they won't allow themselves to get into debt.

Based on the arguments that we have gone through thus far, it should be evident that the financially responsible people have the best outlook on what credit cards are and how they should be used properly. Now that we have established that fact, how can we go about using credit cards properly as the tool that they are?

For starters, credit cards should be used for most if not every purchase one makes. Going back to the point about getting cashback on your purchases, let's assume that the average American household spends $50,000 a year in total. If you were to have a credit card that pays 1% cashback on all purchases(there are several that do this) then you would have earned a total of $500 a year simply from purchasing the things that you already do on a daily basis. You can't even find a savings account these days that pays you 1% on your money, so how can anyone afford to not take advantage of this great tool that credit cards are offering us?

In addition to that, credit cards give us the ability to have access to immediate money in case of emergencies or unexpected expenses, and that in and of itself is an amazing tool.

If that still isn't enough to convince you then thirdly we need to realize how credit cards are a wonderful way to build our credit history and score so that when we want to make big purchases in the future, such as buying a house or car, we will get the lowest interest rates possible and again save a substantial amount of money!

The trick to all of this though is that you need to be financially responsible enough to stick to a budget and pay off your credit card in full every month. If you can't stick to a budget, then you have much worse problems than whether or not you need to use a credit card.

By being smart with our money and integrating credit card use into our daily lives, we can achieve financial success and independence much more quickly in life, in comparison to those that do not use credit cards.