In an era dominated by digital transactions, credit cards have become an indispensable tool in our daily lives. I personally own 16+ credit cards and love the benefits provided by them. Beyond their physical presence in wallets, credit cards offer a unique advantage when used judiciously. The key lies in leveraging credit cards for essential expenditures – from groceries to work-related purchases – while adhering to a golden rule: never carry a balance. In this blog post, we explore the myriad benefits of using credit cards responsibly and delve into how, when wielded with financial acumen, they can be more than just a payment method. By debunking common misconceptions and emphasizing the power of disciplined usage, we aim to shed light on why credit cards, when handled wisely, can be a financial ally that pays you back.

One of the undeniable advantages of using credit cards revolves around the unparalleled convenience they offer in our day-to-day transactions. From swift online purchases to seamless in-store payments, the ease of use makes credit cards a preferred choice for many. Picture a scenario where you can swiftly navigate through your shopping, pick up essentials, and effortlessly make contactless payments – all with a single card.

Moreover, the security features embedded in credit cards contribute significantly to a worry-free payment experience. Credit card companies prioritize the safety of their users, often implementing robust fraud protection mechanisms. These measures detect and thwart unauthorized transactions, shielding you from potential financial losses. Unlike debit cards, which are akin to carrying cash and can be challenging to recoup if compromised, credit cards provide an added layer of reliability. When using a credit card, you are essentially leveraging the credit company’s funds, making them more studious in fighting fraud and theft. In a world where financial transactions are increasingly digitized, this reliability sets credit cards apart as a secure and trustworthy payment option. All this to say, if your money is stolen from your bank account, you have a problem. If it’s stolen from your credit card account, it’s the company that has a problem. With that, we’ll get into how using credit cards can build your credit history (if and only if we do it smartly).

Beyond the realm of day-to-day transactions, credit cards wield a subtle yet powerful influence on your financial profile (aka credit score). Using a credit card responsibly can be a strategic move to build a positive credit history over time. Credit history is a crucial component of your overall credit score, and a favorable score opens doors to favorable interest rates on loans and mortgages down the line.

Navigating the nuances of credit card usage involves more than just timely payments; it’s about understanding and optimizing your credit utilization. This term refers to the ratio of your credit card balance to your credit limit. Maintaining a lower credit utilization ratio showcases responsible financial behavior and can positively impact your credit score. Additionally, the length of your credit history, influenced by the duration of your credit accounts, plays a role in your creditworthiness.

By consistently making on-time payments, managing your credit utilization wisely, and strategically diversifying your credit portfolio, you not only build a solid credit foundation but also position yourself as a reliable borrower. Now, we have to develop a long term mind set. We have to recognize that credit cards are NOT for everyone. If you lack impulse control, do not open a credit card. You’re much better off paying for everything with the cash that you have on hand. Again, I emphasize the fact that we should NEVER (and I do mean never) hold a balance on a credit card. But, for those that are trying to learn what credit is and how to delay gratification, credit cards are an excellent option to get back 1-5% of their regular spending. How?

Many companies (especially military friendly companies) offer credit cards with cash back. Meaning, for every purchase, you get anywhere from 1-5% back on each purchase at the end of the statement period. So, you need to buy $100 of groceries? You can earn anywhere from $1 to $5 dollars back, on food, that you need to purchase anyway in order to survive (food being a basic need and all). Or, need new tires for your car? And a set of 4 tires is going to cost you $1000? Buy them with your credit card (backed by the $1000 in your bank account) and you can earn as little as $10 or as much as $50 in cash back…. Because if you NEED tires, you might as well get paid back a little bit for purchasing them, right?

This is just scratching the surface, as there are cards that one can apply for that enables them to access travel lounges for free (especially if you’re in the military like me and travel a lot). We’ll talk about that more in the next post.

So what’s the hold up? Go get you an American Express Platinum card or Gold card or Chase Sapphire Reserve if you’re feeling up to it (military members don’t pay any fees associated with owning the cards). You get a premium card with premium benefits and all the ownership fees are waived (fees averaging $700 a year).

**If you’ve made it this far, know that there are caveats to the above information. If you lack impulse control, do not open a credit card. The credit card companies benefit off of people that spend more than they make. That cannot be understated. But if you’re into life hacking and optimization – these cards can be a literal financial game changer. Do with this information what you will!

-Michael, with Military.cash