No, this article isn't a joke. It's true that, looking at the many critical things we've published here in Fooldom about credit cards, you might think we viewed them as evil. Consider:
- How to Owe $40,000 by Doing Nothing
- Credit Cards Sabotaging Mortgages
- Beware of Canceling Credit Cards
- $24 Billion to Card Companies. for What?
- Sneaky Credit Card Tactics
They're not evil, though. They're quite useful, in fact. Here are some reasons why:
- Convenience. Instead of having to guess correctly how much cash you'll need to carry around with you each day for expenses that come up, you can simply carry a little cash and a handy charge card. Instead of having to tediously write out checks for purchases, supplying supporting driver's licenses and phone numbers, you can just whip out that piece of plastic.
- Charge card statements can be a wonderful informational resource. They offer an extremely useful record of how much you've spent on this and that. Add up all your gas station charges, for example, and you'll quickly see how much of your income your gas tank is guzzling. Some charge cards even send you a lovely booklet once a year, summarizing your purchases and breaking them out into budgetary categories. Charge card statements can be a critical tool as you plan your budget. (You do plan your budget, right?)
- Paying your credit card bills off on time can enhance your credit record and boost your credit score. This can save you big bucks when you borrow money, such as for a home or car.
- From another Foolish perspective, credit cards can be viewed as good because they offer investing potential to folks like us. Look into card-issuing companies such as MBNA
(NYSE:KRB), J. P. Morgan Chase (NYSE:JPM), American Express (NYSE:AXP), Capital One Financial (NYSE:COF), Wells Fargo (NYSE:WFC), and Citigroup (NYSE:C)and you'll find some solid performance and promise.
I recently heard from a Fool reader who shared yet another advantage of credit cards -- float. Here's what John said:
"Last night I did an analysis of our credit card bills (all of which are paid off in full every month) to try and see how much we 'make' off the credit companies. The analysis went something like this: Every purchase I put on plastic means that the money for that purchase gets between 25 and 56 extra days to sit in my savings account, earning 2% annually. After a little work in Excel, I calculated that on an annual basis, the extra interest I get by deferring payment for my purchases adds up to about $30 a year! More interesting, this is actually 2.33% of the monthly statement balance -- more than the 'official' APY on my savings account! If you add that to the 1% reward we get back on purchases from the credit card company, I discovered that we 'make' as much from the credit card company as we do from interest on the sizeable portion of our emergency fund that lives in our savings account. Of course, this analysis is only valid if you never carry a balance from month to month."
Pretty cool, eh? Note that John has an emergency fund -- as we all should.
The bottom line for me is that credit cards are what we make of them. If we spend irresponsibly, they can do us in. If we use them sensibly, charging only what we can afford and paying off the bills on time, they can actually make us some money.
Learn many surprising and important things about the credit card industry and how to get out of debt in our Credit Center. And read about all things credit-related on our Consumer Credit / Credit Cards discussion board.
Longtime Fool contributor Selena Maranjian does not own shares of any companies mentioned in this article.
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