Controlling and understanding debt can really help you manage your financial life and help build wealth.  Debt that is out of control can make you feel stressed and make it difficult to reach your goals.  Credit cards and holding a balance on a credit card is one form of debt many people can live without.  So why would you want a credit card and how can you use them to your advantage?

Let’s answer the first part of the question, why would you want a credit card?  Credit cards can help you build credit for larger purchases.  You might need to build credit to get a mortgage for your first home or buying a car.  A credit card is often the first stepping stone in many people’s lives to building credit.  It’s typically a much smaller amount than a mortgage or car loan but depending on your situation but can still amount to a large sum.  Credit is also extended based on other factors but not limited to income, occupation, payment history and other factors that affect your financial life.

Now we can answer the second question, how can we use credit cards to our advantage?  Using credit cards to your advantage doesn’t mean you have to rack up the debt.  You can use a credit card and avoid paying finance charges and live at peace.  Here are a few ways to use credit cards to your advantage:

• Budgeting: Helping you track your purchases and planning more efficiently.
• Rewards: Taking advantage of rewards cards that may give you cash back, travel, leisure and other rewards.
• Security: Helping to reduce the liability and necessity of carrying too much cash.
• Flexibility: Your ability to pay online and on the go.

Owning a credit card can be a good thing.  These are just a few points on why a credit card can be a good thing.  You will still need to watch the amount you spend just as if you were to pay with cash.  After all, it’s still money whether or not it is cash or credit.

There are other areas you have to watch out for when using a credit card.  It’s more than the psychological difference of counting out the dollars versus swiping a plastic card.  It’s the high interest charges and other fees you will have when carrying a balance.  Sometimes cards offer 0% interest for 6 or 12 months but after that time period has passed you may have finance charges and other fees.   It’s really important to understand and budget well when dealing with credit cards.  The first order of business is to budget so you don’t spend more than you can pay.  Just because you can qualify for a credit card and hold a balance doesn’t mean you should.

This also leads to another topic, “the art of saving,” spending less than you earn.