Sunday, 28 April 2019

Credit Card For Beginners: Using Credit or Debit Card

Credit Card For Beginners: Using Credit or Debit Card

Today we're going to talk about credit versus debit and which is better. A lot of people will ask "hey" what if I pay on time I don't have any credit card debt and you want to use the point on the credit card in order to get the advantage. Some people might say that you should not touch credit cards at all because they're evil that will get you into debt

The fact of the matter is credit cards are good for people that are very much in control of their credit cards. I thought about simple criteria at which you should just use a credit card or debit cards, it depends on the type of person you are

Read: Credit Card For Beginners: What To Consider Before Getting a Credit Card

if you are a person that pays off your credit card every single month and you don't have any credit card debt then yes you should use credit cards and you should use the credit card points to your maximum advantage because that represents a good amount of side benefit in terms of point, and that can represent something like 1000 to $2000 a year base on your spending and your percentage cash back on your credit cards

However, if you owe anything on your credit card it just means that you're not very good at budgeting and perhaps you're prone to overspending and this means that in the future you'll probably spend a little bit too much and you're going to owe some stuff on the credit card

In that sense having the credit card will actually get you into debt because you're going to be using that to cover expenses that you cannot pay for and that is not a gooa way to use a credit card.

There are 3 arguments for using debit cards only

1. Credit cards tend to make you spend more. If you spend more it's kind of negates the effect that you get on cashback

If you're a type of person that is not very prone to marketing and you can walk in the store and walk back out with nothing in your hand then you are not prone to this rule where you would spend more for credit cards

2. The second argument is that you have to use a little bit of brainpower in order to figure out which cards to use, keep track of your cards, make sure everything is paid on time

3. Millionaire actually never talk about gaining their fortune from all the cash back they've received, it's true because when you do your cashback you can only get so much every single year maybe 1000 or $2000 it will represent a very small portion if you're a millionaire

But the deal is it does represent something it's certainly not going to be a majority but every little bit helps.

To gig a little deeper I want you to figure which portion of the US population will actually benefit from actually using credit cards. 

  • In 2016 the average household income is $61,989
  • In 2017 the average credit card debt is $18,939
  • The average APR for that credit is about 17%

Assuming you pay it every month and not let it accumulate then every year you would actually be spending $3864.30 on the credit card interest alone, you're not even putting the extra principle to pay the pay down

Back to my point of if you even owe a little bit you really should not be using credit card at all, because even if you owe a penny it means in the future you're going to rely on the credit card in order to gain access to a little bit more cash, you're going to use it to buy stuff just because it's there.

In that sense if you owe anything it's the best that you just pay it all off and cut off your credit card and never use them again because that's the way the general population uses their credit cards and if you're the general population, if you're average or lower, you really should cut off your credit card

Pay it all off first and then cut them up.

Using credit cards and debit cards is not a clear black and white thing, some people would say you should use a credit card while other would say you should use a debit card, there's no clear indication, it depends on the type of person you're

If you can take advantage of the credit card, do use it, if you're not a responsible user, by all means, use cash only

That's all we have for you today and if you like reading our article please follow us on our social media

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