We’ve learned about debt the hard way, these last several years. We’ve gone into debt. We’ve felt taken advantage of by big banks—and for many of us, a simple savings account and a cash-based lifestyle have become a comfort zone.
But we’re doing a disservice to ourselves to not use credit wisely. Used well, in a controlled manner, credit cards help us build credit that will help with starting a business or buying a home, and they provide extra security for our purchases.
If you decide to give a card a shot, here are some tips on what to look for:
1. Rewards or Interest Rates: Pick One
You can generally pick a card for one of two reasons: a killer interest rate or killer re-wards. The former is for people with a lot of debt. The latter is for people without it. Re-wards are a great reason to use a card—but it’s good to know that the better rewards cards often come with higher interest rates and fees.
2. Do the Math on Annual Fees
There’s no way around it: The cards with the best rewards have the highest fees. The is-sue is whether or not they’re worth it for you. A lot of people rely on travel rewards for vacation planning, or on cash back programs to buy new computers, etc. Before you sign on to an awesome-seeming reward program though, consider whether you get more in rewards than you’re paying in fees. Look at your monthly spending, compare it to the rewards program and do the math.
3. Commit to Paying in Full Every Month
Charging all of your expenses to a rewards card isn’t a bad idea — just make sure you always pay off what you spend. Rewards points are a good thing, revolving debt is not. Also watch out for caps on rewards points that make a certain level of spending unnecessary.
Building credit is critical to being able to control your own destiny. Might as well get started, and enjoy some benefits along the way. Start 2015 out with a new relationship with your credit cards and put them to work for you.