A credit card is an incredibly useful tool in your daily life. If you’re lazy like me, you’ll be happy that you don’t need to worry about making trips to the ATM. You also won’t have to carry much cash around. And of course, you can buy “all the things” online!

Why you should use credit cards

Credit cards are basically an interest-free short-term loan if you pay your bill on time. The better your credit score, the bigger the “loan” you can get. Furthermore, using credit cards makes it much easier to keep track of your spending. With automated budgeting services like Mint or Personal Capital, it’s a breeze to see how much and what you are spending on.

You can also get a variety of benefits for using your credit card such as extended warranty on purchases as well as free rental car insurance. Most importantly, credit cards help you boost your credit score, and therefore save you significant amounts of money in the long run. This is because you would qualify for a better interest rate on a mortgage, for example, meaning that you could save tens of thousands of dollars in interest when paying off your mortgage.

A woman enters her credit card information into a laptop

Credit cards can make our lives much easier, but only if we use them responsibly.

The dangerous side of credit cards

That said, credit cards can also hide some traps. For one, it’s easier to overspend. Let’s face it. You probably don’t always pay attention to the bill when you swipe your card. I’m guilty of that pretty much every time I go to the grocery store. It’s too easy to “put it on the card” when you see something you may want but don’t necessarily need. This makes it trivial to overuse credit cards and end up in debt, and a lot of people end up in this exact situation.

There are also the dangers of late payment fees and the very high interest rates (also known as an annual percentage rate, or APR). If you don’t understand how your credit score is calculated, you can actually worsen it by using your credit cards the wrong way.

The good news is that all of the above dangers can be avoided. You won’t have to pay exorbitant fees and interest if you use your credit cards wisely. Use your credit cards as a tool to help boost your overall credit instead.

Getting a new credit card

In order to boost your credit score by using credit cards optimally, first you need to have a credit card. If you don’t have any yet, here are some tips which should hopefully get you started and set you up for future success with building credit. If you already have a credit card or two, you can skip this section.

Obtaining your first credit card can be difficult. But there is a simple solution. Get your bank to issue you a protected credit card. These are credit cards that enable you to deposit a few hundred dollars into a savings account, which the bank then uses as collateral to extend you credit. After a few months, assuming you’ve been paying your bills on time, you’ll be able to graduate to a normal “unsecured” credit card.

There’s also a recent Wall Street Journal article about banks planning to issue credit cards to people with no credit history. The idea is that large banks such as JPMorgan Chase and Wells Fargo would share checking and savings accounts information in order to improve new applicants’ chances to be approved for a credit card. This is expected to go into effect in 2021.

Some credit card tips for beginners

When you are just starting out with credit and have no credit cards, get one and wait a year before you apply for another. You really don’t want to apply for too many cards too quickly, especially since your credit limit will be low. It will also mean managing more credit cards, and as a beginner that’s more unnecessary complexity. Do yourself a favor and limit yourself to opening one card per year. More importantly, try to understand how it would affect your credit score first.

You should also decide whether to get a good cash-back card or a travel rewards card. It really depends on your lifestyle now or in the future. If you are traveling a lot or think you may do so soon, then go with a travel rewards card. One catch with those cards is that to get the best rewards you might have to pay annual fees for your card.

There are definitely good cash-back options which I’d personally go with before a travel card. You could be getting 6% back on groceries, 5% back on Amazon and Whole Foods purchases, 4% back on all dining and entertainment, 4% back on all media streaming services, and 2% back on everything else. I personally have a number of cash-back cards and a single travel rewards card. That happens to be my only card with an annual fee.


Just remember the following and you should be in good shape:

  • Don’t apply for too many new credit cards at once
  • Keep your (over)spending under control
  • Don’t go into credit card debt that you can’t pay off quickly
  • Use your rewards!

Follow these pointers and you should be able to enjoy all the benefits credit cards have to offer without falling into any of their hidden traps.

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