What Can I Use A Credit Card For?
While you can use credit cards for large purchases or emergency expenses, it can be cost you more in the long run. Credit cards make the most sense in the following situations.
Everyday Purchases
Credit cards are best for everyday purchases, especially if you pay the balance off monthly. Some credit cards offer travel or reward programs that provide perks for using the card.
The key is not to charge over 30% of your credit limit and to pay the balance down or off as quickly as possible to ensure it doesn’t hurt your credit score and to reduce the amount of interest you will pay over time.
Retail Financing
Some retail credit cards to major stores offer an alternative to personal loans. Retailers may offer low introductory rates, sometimes even 0% financing, for a limited time, acting like a personal loan. Pay close attention to the terms because you’ll likely have to pay the balance off within a specific period to avoid accruing interest or before the interest rate increases.
Balance Transfers
If you have credit cards with a high interest rate, a balance transfer card may offer a lower interest rate, sometimes even 0%, making it easier (and faster) to get out of credit card debt. However, before choosing this option, be sure you understand the terms. There may be a balance transfer fee, usually 3% – 5% of the credit card balance.
Credit Cards: Pros And Cons
Credit cards have pros and cons to consider as well when choosing between a credit card and a personal loan.
| Pros | Cons |
|---|---|
| Flexible and easy for everyday purchases | Higher APR compared to personal loans |
| Potential to earn rewards | Some vendors charge convenience fees or don’t accept all credit cards |
| Responsible credit card use can build your credit | Possibility to overspend, accruing more debt than you can handle |
| Purchases can be interest-free if paid in full monthly | Some credit card companies charge annual fees |