Who: This post is for people who don’t have a credit card, who are considering getting a credit card, or who haven’t gotten a credit card because of reasons they think are good.
What: This post will discuss very briefly what credit is and will discuss in depth why you should have a credit card.

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What is credit? In its simplest terms, credit is borrowing money to make purchases. In my opinion, everyone should have a credit card. This post will highlight the main reasons which include convenience, building credit, utilizing float, having purchase protection, and best of all, getting rewards for using your card. Without further ado:

  • Convenience - With a credit card there is no need to deal with change and wallets filled with lots of bills. Many people don’t carry around a lot of cash and in the event of an emergency, they’re usually scrambling to find the money they need. Also, your credit cards are much safer than cash in case you’re waving around your money and happen to get mugged. Besides, money is so dirty.
  • Build Credit - Having a credit card allows you to build up your credit history. I’ll talk more about this in a future post, but for the basics, it is important to know that all your credit habits are tracked. If you spend wrecklessly, you’ll pay for it but if you’re responsible, you can save a ton of money. How, you ask? (Yeah, you asked.) Your credit history is what lenders and sometimes employers (uh oh) look at when evaluating how financially responsible you are. If you have poor credit, you’ll not receive good rates on loans and you’ll be seen as financially irresponsible. Again, more on credit scores in a future post.
  • Float - Float is a beautiful thing. The concept of float, at its most basic level is simple. Every day that you can go without having to pay for something, you’re earning interest on the money that you would have spent. We can take a very simple example.

Jimmy wants to buy a $1500 television, because he likes TV. He is also into some sketchy businesses, so he has a lot of cash lying around. He can either pay for the television in cash (because he’s that cool) or he can pay via credit card.

Scenario 1: Jimmy pays via cash. He gives the television man $1500 and he gets his TV. End of the deal.

Scenario 2: Jimmy pays via credit card. The card is charged the $1500 and on his way home from the TV store, Jimmy puts the $1500 into a high yield savings account which gets him 5.15% per year (Like Emigrant Direct). His credit card statement closes in 20 days, and he has another 20 days to pay his bills, but Jimmy likes to play it safe (except with his shady business practices) and he pays 5 days early. So he’s had the $1500 he owes on his credit card, in the bank for 35 days before it’s due. In the 30 days he earns $7.53 on his $1500 investment. Something he couldn’t have done if he paid in cash.
This silly little example seems trivial, but for those who spend large amounts of money on a monthly basis (like you and me, c’mon bars and restaurants aren’t cheap), it can add up over the course of a few months and years.

  • Rewards - Ahhhh, one of my favorite things about credit cards. The landscape in the credit business is so competitive that more and more companies are looking for ways to get customers. A large number of credit card companies offer rewards programs. You get REWARDED for using your credit card. The rewards range from points that can be redeemed for merchandise, services, etc to cash back on your purchases and even miles on your favorite airline and hotel loyalty points. The number of rewards cards out there are in the thousands and based on your spending habits, you’re likely to find one that’s right for you.
  • Protection - Most credit cards offer fantastic protection for the buyer. If you promptly report a stolen cards, most credit card companies will hold you liable for very little, if anything at all. Additionally, many credit card issuers allow you to “chargeback” or get a refund for a purchase that you made that you’re unhappy with. Many cards offer various types of extended warranties and travel insurance, etc. These protection vary based on the issuer, but rest assured, if you get a decent credit card, you will get some, or even many of these protections.

If you’re not sold already, I’m probably not going to be able to sell you.

What? You say that you are sold? Great, stay tuned in the coming weeks and months for credit card strategies to use and some of my recommendations to use.

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