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MVCU, credit cards
Home / Tools / Plastic Money
Plastic Money on 5/28/2021

Plastic Money

think pink

According to a survey from CreditCards.com, “47% of Americans are carrying credit card debt.” This statistic would make my grandfather furious if he heard it. He would often say to me, “Vivi, the world started to go downhill once they introduced plastic money!” Following my grandfather’s testament to the downfall of society, he would then tell me the story of how he used to always leave a wad of cash in his work locker for emergencies.

His locker remained unlocked and, oftentimes, coworkers would borrow some of his “hidden” stash. My grandfather never questioned it, as he explained, “I trusted that they would always pay me back and they did.” This work locker was my grandfather and his friends’ version of a crediting system. It was an “old-fashioned” system, but it worked. My grandfather has refused to get a credit card in his 87 years of life.

It wasn’t until I started to think about buying a house that I had to accept my fate and conform to the constructs of society and get a credit card. Naively, I at first hoped that my punctuality with my car payments and student loans would give me enough of a good credit score to carry me through life and I’d just live happily ever after! There was some truth to that: I did have a good credit score, but there wasn’t enough depth.

I only had installment loans (car loans and student loans), not revolving debt (credit cards). Installment loans show that you can pay back borrowed money consistently over time while revolving debt proves you can manage varying monthly amounts and pay it back.

Now, there are no laws saying that you need a credit card in order to buy a house. However, a credit card can make purchasing a home easier, provided you don’t carry a revolving balance and spend yourself into oblivion up until your home purchase! Essentially, a credit card gives you a chance to show a lender that you’re a good credit risk and that you’re responsible with paying back revolving debt.

I knew that I’d be looking for a home within a two year time frame from when I would get my first credit card which gave me ample time to bump up my credit and prove to lenders that I can manage my personal cash flow. I also knew that I was still terrified of going into credit card debt so I made the decision to only use my credit card on groceries. Again, hi! I’m a conservative financial worry-wart. Nice to meet you. This approach eased me into using a credit card and I must say – I did feel kind of cool the first time I used it!

Like most things in life, there are pros and cons to using credit cards. If you’re smart about how and when to use it then a credit card can be a useful financial tool. I’ve now had my credit card for a year and I’ve learned a few things along the way. If and when you decide to apply for a credit card, here are some tips and tricks I’ve learned from my own credit card journey:

  1. Do your research and go in with a game plan! I was terrified to get a credit card (and I still am a weenie using it). I compared different cards and spoke with trusted coworkers and my family members about the pros and cons of using a credit card and which company they use. I also made sure I knew how/when I was going to use my card. I knew I didn’t want this as my main method of payment but as a way to establish credit so I chose to only use this when I was grocery shopping.
  2. Use automatic payments and forget about it! Improperly using a credit card can negatively affect your credit score. For instance, paying your bills late or not paying at all is a negative behavior that would hurt your credit. Setting up an automatic payment made sure I never would miss a payment! You can pay off the card’s minimum, a selected amount, or in full each month. Whatever you choose, just be sure that the source account has enough money to cover your payment! No one wants an overdraft fee!
    P.S I promise you the payment will go through! I got so nervous when I didn’t see the automatic payment pulled from my account so I went in and paid manually. I double paid doing this! Be patient, monitor your account and trust the automatic payments you have set up!
  3. Take advantage of the perks and rewards! Most companies offers perks like fraud protection and rewards like cash back offers! Oftentimes, a company will offer a certain percentage cash back on all purchases or certain ones. My brother-in-law uses his cash back to pay off his next months’ statement!
  4. If you’re a spender, use a secured card! If you’re really nervous about your spending habits and need to re-establish your credit history – try a secured credit card! A secured credit card is backed by a cash deposit you make when you open the account. So, if you deposit $300 then you have a $300 limit. If you don’t pay your bill, the issuing company can take the money from your deposit. Used wisely, you can improve your credit using this method and eventually qualify for an unsecured credit card which doesn’t require a deposit.

Overall, credit cards have their downsides but they also have plenty of positives and can do more good than harm if used correctly. A credit card can help build the necessary credit history you need to purchase a home and it can lower prices on things that you buy thanks to rewards! A credit card offers great convenience and security with fraud protection. Bottom line, it is not really a question of whether you should use a credit card, but rather, how you should use it. All you need to do is map out your credit card game plan and stick to it!

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Category: Saving & Investing Money



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