Financial Management - Using Credit Wisely

Using credit wisely can be a struggle for a lot of people.  Currently I am coaching my oldest daughter to use her credit wisely and teaching my youngest the same thing.  Most people are never taught anything about using credit and what it all means.  In order to have borrowing power you have to know the proper way to handle your finances and that includes using your credit cards.

Recently my daughter applied for and received her first credit card.  She got it through our credit union and has a very small limit on it.  It is the perfect amount to learn with.  I suggested she use it initially for fuel purchases at the gas station and a handful of other small purchases at the store.  But!  Don't spend more than you can afford to pay off when the bill comes due.  She paid it and was thrilled the next time she checked her credit score to find it had jumped up several points.  Then next month she linked it to her Amazon account and also used it to renew her phone service.  She will pay that off when the bill comes due as well.  As she continues to do this she will establish herself as a responsible consumer that pays her bills on time and her credit score will rise and reflect that.  The goal for her is to someday purchase a home of her own and she wants to not only qualify for a mortgage, but to qualify for the best possible interest rate on that loan.

I use my credit card to purchase darn near everything.  I track my spending so I don't overspend and when the bill comes due I pay it in full.  My card allows me to earn rewards points and I save them up until I have enough to cash them in for gift cards I use for various projects around our house.  Many a project has been completed with those gift cards.

I also have a PayPal account and a Home Depot account that allows me use of their credit for six months at a time interest free.  I always make sure when I use these accounts that I get them paid off in full before the end of that timeframe so I don't pay any interest.

I don't mind using other people's money at no cost to me and save my own.  If I can get an interest free loan that allows me to incorporate payments into my regular budget then I'm all for it.  While I am not the type of customer most creditors prefer as they rarely earn any money from me I am also one they prefer because I don't default on my payments either.

Having a high credit score and responsible payment history allowed me to obtain a 0% interest auto loan a few years ago.  Can you imagine paying for a car over time and essentially paying no more than the actual cost of the car?  That is what I did until this year when I decided I didn't want the monthly payment anymore and paid it off in full.

Using credit can be a burden and if you aren't careful it can get you into a lot of trouble.  But used wisely it can become one of your greatest assets.  Be smart.  Stay out of debt.  Use it in moderation and pay it off right away.