The Right Way to Use a Credit Card

There’s a right way to use credit cards and there’s a wrong way. Of course, most people are doing it the wrong way. I did it the wrong way for many years.

I had no ability to hold of gratification. I had to have everything now now now! Eventually I had my credit card charged up to the limit and every month I paid the minimum. One day I found out how much interest I was paying on the balance. I don’t remember what it was but it was a heck of a lot of money I was throwing out the window every month. Oh, how banks love financially ignorant people. That day I cut the card in two and have never since used another card to spend money I didn’t have. If you have credit card debt problems check out this post.

So that’s the wrong way to use a credit card. What’s the right way? Cashback credit cards actually pay you a small amount for spending money using the card. As long as you pay off the card each month you actually earn money for using it.

Lately Sally and I have been buying some furniture and things for the new flat we are renting. We have a special card from Bodaclick we got when we were married. It gives us cashback when we buy at many stores, including Ikea where we have been buying things for the new house. So far we have received about €50 for using the card. It’s not a lot of money but it’s better than paying €50 in interest. Also many of the things we have bought can be deducted as work expense (Since she is self-employed and I own a business). So that knocks of another 20% on some items in fewer taxes to pay.

You can also use credit cards to buy an asset that produces more income than the interest you pay on the card. I know one person who maxed out his credit cards to start a business. That’s a little risky but at least you are trying to build something and you have to do whatever it takes to get going.

So credit cards aren’t all bad if you can put them to good use!