4 Ways Credit Cards Can Actually Help Improve Your Finances

Don't shy away from using credit cards.

Credit cards get a bad reputation, and for good reason. Card companies aim to trap you in debt for decades by setting low minimum payments, and far too many borrowers get in over their heads.

The reality, however, is that when you use them responsibly by paying your balance on time and in full, credit cards can be really good for your financial situation. In fact, there are four big ways they can improve it.

1. Credit cards can help you build your credit score

A good credit score opens all sorts of doors for you, making it possible for you to borrow for wealth-building assets such as a home. It also reduces the cost of insurance premiums.

And credit cards are one of the single best tools you have for building credit. You can qualify for secured cards even with no borrowing history or bad credit and can develop a record of on-time payments simply by paying your bill each month. You don't have to carry a balance to build credit by using them. And the longer your cards are open, the more they'll boost your score, as average age of credit is one of the key components of it.

Of course, to use cards to build your score, you do need to keep your credit utilization low (by not using more than 30% of the credit available to you) and pay your bills on time each month. But it should be easy to do that if you're responsible with your card use.

2. Cards enable you to get paid for spending you'd do anyway

There are many great rewards cards out there, including cash back cards and those that offer travel or miles. When you use them, you can get money back for all the spending that you'd be doing anyway. If you have a cash back card, you could invest the money or use it to help pay off your card balance. If you get rewards, such as miles, you can pay for trips that you'd otherwise have had to cover with cash.

Although interest on credit card debt would dwarf the value of any rewards earned, you won't have to worry about that if you pay off your balance in full. And as long as you do that, there's no reason at all to pass up the chance to get paid for covering your routine expenses with your card.

3. Credit card balance transfers can provide the opportunity to reduce your debt balance

Balance transfer cards actually offer a way to make debt payoff less expensive. You can transfer the balance of an existing credit card to one offering a 0% introductory promotional rate. This could substantially reduce interest costs, making principal payoff faster and easier.

While balance transfer cards are most often used to pay credit card debt, they don't necessarily have to be restricted to that purpose. In some cases, credit card companies will send you a balance transfer check you can use to pay off other things. I used one of these checks once as an alternative to an auto loan, allowing me to make payments on my car interest free.

Of course, it's important to realize that the standard card interest rate will likely be pretty high, so make sure you can pay off the card balance before the promotional rate expires. And you will likely have to pay a small balance transfer fee.

4. Cards make it easier to track spending

If you want to keep track of what you're spending money on, credit cards help make that simple. You can charge all of your purchases and refer back to your credit card statement to easily see your spending. Many apps also allow you to automatically upload a record of your purchases so you can analyze them in budgeting programs.

Take advantage of the benefits that cards can offer

If you can avoid carrying a balance on your credit cards, they can be an incredibly powerful tool that helps you in many ways. Don't be afraid to take full advantage of the many benefits they offer. Just find the right card today to maximize your rewards and make sure you have a plan to pay off your bill on time each month before you owe interest.