Growing up, the typical American doesn’t get much advice about credit cards. At best, maybe you were told to beware of credit cards because they make it easy to bury yourself in debt. While you might keep your debt lower by following that advice, you’ll also miss out on a valuable financial tool. With a better understanding of credit cards, you — and not the banks — can come out ahead.
Here are five valuable tips you may not have heard before.
1. Always have at least one cash-back or travel rewards card
No matter your opinion on credit cards, it’s a mistake not to have at least one. A credit card is an excellent way to build credit, especially for those who don’t have much of a credit history. When you use one, you’re technically borrowing money, then paying it back. This repayment is reported to the credit bureaus, causing your FICO score (the most common type of credit score) to increase. Using a debit card, on the other hand, has no impact on your credit score.
Because it’s in your best interest to have a credit card, you might as well get one that will earn you something back with every purchase. Even credit cards made for people with bad credit or no credit history often earn a small amount of cash back or reward points for every dollar spent. And once you have a good score, you’ll qualify for cards with even better reward rates.