FEATURED ARTICLES

In today’s economy, there’s a good chance you’re trying to get more bang for your buck at every opportunity. What if we told you that adding more value to your purchases is possible?

It might sound counterintuitive initially, but using your credit card presents a lot of potential for your regular spending. In this article, we’ll discuss the benefits of using credit for everyday living expenses.

Why Bother With Credit at All?

We get it: there’s some irony in, at its core, constantly borrowing to pay for living expenses. Considering all the risks of spending through credit cards, one wonders why anyone would use credit continually to pay for daily necessities.

The answer is simple. Responsible credit card use helps build credit, showing lenders you can be trusted. This gives you a good credit score that you can leverage to finance more significant purchases like a home or automobile.

Think of using a credit card as a means to an end. So long as you keep your goals in mind and work towards them, using the “magic plastic” will be as natural as using your debit card.

Signing up for a credit card can be a big decision, and using it brings its fair share of challenges. However, as long as you keep your goals in mind and spend smartly, you can use the concept of credit to your advantage. Here are some recommendations to keep in mind.

Use Your Credit Card According to Your Budget

This first tip requires some mental hacking. In other words, you might have to rethink how you see a credit card.

First, never think about credit as “free money.” Sooner or later, you have to pay back everything you charge—and then some pending interest. Instead, think of a credit card as a component of your budget.

In other words, get into the habit of thinking you are pulling from your budget every time you charge something.

Do you remember your budgeting basics? Here’s a quick summary:

• Determine your living expenses
• Allot a proportion to savings
• Set a spending limit and stick to it
  

We also have a primer for making a budget if you need to refer to it.

Ideally, your budget should have allotments for living expenses and a lump sum for “luxuries.” Make sure your spending limit is defined in relation to your income. Never charge beyond your means.

As long as you use your credit card according to your budget, paying it back will be easier since you are technically using money you know you have. Remember: live by your budget and follow it as closely as possible!

Another aspect of this strategy is being mindful of your payment due dates. Always be aware of when your balance is due and pay off as much as possible before that day arrives. Ideally, you pay off the balance well before the due date to avoid late fees and interest charges.

Pay Your Balance Regularly—and Beyond the Minimum

Always remember that interest payments are the costliest credit card expense. Your interest rate and outstanding balance determine the interest charge on your credit card bill.

This is why there is an emphasis on paying down your balance as much as possible before a statement's due date. The higher the leftover balance, the more interest you’ll pay. Therefore, you will want to take measures to minimize that cost.

When using your credit card as the primary payment method, aim to pay off your balance entirely before the statement is due. You won’t have to pay extra through interest when you pay your balance in full.

This is why having a budget is important: it determines how much you can safely charge so interest won’t have a chance to eat away at your income and savings.

If you have a leftover balance, always pay more than the minimum payment. This ensures you minimize the interest the credit card company can charge you.

If you have an outstanding credit card balance, this is also a good time to rethink your budget and ensure you don’t charge beyond your means for the next month.

Take Advantage of Rewards Programs if You Have Them

The market for credit cards is vast. Many have rewards programs to entice you into using them more often.

If you’re unfamiliar with a credit card rewards program, they work like this:

• When paying with the eligible card, you get a set amount of points
• You can use these points for “rewards,” like cash back, discounts on travel, and merchandise
• Point programs have exchange rates, like every dollar spent earns 2 rewards points
• You use the rewards points to redeem the rewards
  

Not all credit cards have a rewards program. If you want to take advantage of this type of perk, verify that the prospective card has such a program and that the terms agree with you.

If you hold a credit card that offers a reward, you should take advantage of it as much as possible. Remember: abstaining from trading in is tantamount to leaving money on the table!

Reward points have many uses, like:

• Lowering the cost of gas
• Paying for your card’s annual fee, if applicable
• Using cashback to supplement an emergency fund or pay down another balance
• Adding more value to your next vacation
  

Remember that your budgeting and spending principles can make using a rewards-focused credit card a good idea. Imagine getting paid for purchases that you are going to do anyway! That’s one of the key selling points of a rewards program card.

If you “charge it” sustainably and only for things you can afford, a rewards credit card can grant perks for being a savvy shopper.

A disciplined spender with a well-defined budget can make a credit card a seamless facet of their finances. If you are interested in signing up for a credit card, teaming up with your credit union might be a good start.

First Florida is your partner in spending smartly with plenty of perks. Try our Diamond Reward Visa Credit Card, which offers rewards for everyday spending. Visit our credit card page to learn more.