4 Ways Your Credit Cards Can Help Your Finances Improve

Believe it or not, using credit cards could help you better your financial picture.

Key points

• Credit cards tend to get pegged as a dangerous tool that drives people into debt.
• Using credit cards strategically could actually work wonders for your financial picture rather than hurt it.

You'll often hear that credit cards could pave the way to unhealthy spending -- and land you in a pile of debt. The truth is that in some cases, that could happen. But credit cards could also help your finances improve in a meaningful way. Here's how.

1. Cash back can boost your savings

Many credit cards reward you with cash back for the items you're already buying. That alone makes them worth using.

Imagine you typically spend $1,000 a month on essential bills like groceries, gas, medications, and clothing. If you charge those expenses on a credit card, you could get a portion of your purchases back in cash form. Even if you're only eligible for 1% cash back, that's still an extra $10 a month, or $120 a year. That could be a nice addition to your savings account.

2. Protections can safeguard you from fraud

Credit card companies use different tools and algorithms to spot fraud before it becomes a problem. If someone gets a hold of your credit card number and attempts to make unauthorized purchases, your credit card company might alert you to that fact and stop those transactions from going through.

Just as importantly, once you become aware that a criminal has stolen your credit card number, you may be inspired to do a more thorough investigation into your various accounts to make sure others haven't been compromised. Or, to put it another way, using a credit card could actually prevent you from falling victim to full-blown identity theft.

3. Credit cards can make it easier to track spending

When you pay for purchases in cash, it can be difficult to keep tabs on how much you spent and where. The great thing about credit cards is you can log into your account at any time and see what purchases you've made in a given week, month, or year. The result? Easier and more efficient budgeting.

Keeping track of your spending is an essential step on the road to meeting savings goals and steering clear of debt. And having your various charges available in summary form on screen (or on a paper statement) is a great way to stay organized and aware of your expenses.

4. Credit cards can help you build credit

One problem some people run into when trying to borrow money is they don't have a strong enough credit history to qualify for a loan. The great thing about credit cards is that using them could help you establish a credit history. If you pay your bills on time every month, they could help your credit score reach favorable territory.

Once that happens, borrowing money could become easier and less expensive. But without as strong a credit history or score, you could get stuck having to borrow money at a higher interest rate.

Before you write off credit cards as evil, think about the financial benefits they offer. Using yours could really work to your advantage in a number of ways.