This post is part of the CCC Personal Finance Guest Blogging Contest. If you like it, please help the author by tweeting it, liking it, leaving a comment and voting for it using the social buttons at the end of the post.
Hi everyone ! In this short guest blog post, I'd like to explain how I improved my financial life in about 5 years, mostly by using credit cards wisely ! Here goes my little story ...
I'm a young worker and I started my career about 5 years ago. One of my best moves was to apply for a credit card at the same time. At that age, I didn't know how useful credit cards could become to me. When young, you do not have a lot of expenses, and one of the only use for the card was to shop online. One thing you have to keep in mind is that even if you use your card only once a month, or even less, you're building a good credit score. It worked for me! Two years later my credit score and my savings were good enough to buy a house. But wait, the fun part about credit cards has not yet begun.
Being a homeowner, I knew I would have some extra expenses so I decided to switch to a rewards card. You really need to see it as an investment. Paying for a good card that gives you rewards, insurance and other protections can save you lots of money. I found out that everything can be paid by credit cards, from phone to cable to groceries -- everything except my mortgage. That means at least 60% of anybody's expenses. The reason I call it an investment, is because my rewards and my savings on insurance and protections are about ten time the cost of my card yearly. The most important thing is to compare credit cards to find the kind of rewards that are useful to you, so you can fully benefit from them. For example, my card gives me the possibility to transfer my rewards on my mortgage. That way I will save thousands of dollars on interest through the years.
A year later, I found another way to save a lot of money. I wanted to contribute to a retirement plan to get a tax return (I know there are different plans depending on your country, but most of them give you tax benefits). I applied for a balance transfer card at 0% apr and I bought a guaranteed investment for my retirement using the card. I then used my tax return to pay off most of the debt on the card. You need to be careful with those balance transfer card because the rate after the promotion is usually very high. My advice is to set the payments within a few months, using direct withdrawals. I have another advice for balance transfers. Do not use all of the money available, only transfer about 75% of the limit. That way you can keep a good credit score.
After my balance transfer was fully paid, I decided to keep the card. I think it's a good idea to keep both VISA and MasterCard in your pocket, even if you only use one of them. Maybe I was lucky, but they sent me another promotion and I did the same transfer the next year (at 1.99% apr this time).
One last thing I use my credit card for is budgeting. It's easy to follow your expenses online with most banks. You can watch your transactions daily, and see how much you spend on everything. I love online/mobile banking.
Thanks for reading, and don't forget to comment on how you improved YOUR financial life using credit cards. There must be something I forgot, let me know.
