With the credit crunch going on, there doesn’t seem to be much good news regarding people and their credit cards. Many people burned by the credit markets are afraid to buy anything on credit. The savings rate by the American people is the highest in 20 years. Despite the alarming news, there are good reasons why you should still carry that piece of plastic around with you.
It still pays to have more than one account
The best thing you can actually do for your credit is to make sure you have more than one credit account. According to the new FICO 08 credit scoring model, the more accounts you have, the more worthy you must be to have a credit card. In that way you can actually increase your credit score simply by applying for a card, and being accepted.
You shouldn’t depend on them for emergencies, but…
We’re not saying you shouldn’t have cash reserves for emergencies, but if you’ve been out of work for awhile, credit cards may be your only option to pay for unforeseen repairs or health issues.
If you have a home equity line, few of them are accessible via a debit card. A stop gap solution might be to pay for auto repairs or medical bills with a credit card and pay off the resulting balance later with a the available credit remaining in your equity line of credit. While not a perfect situation, at least you will get the tax deduction.
Using your credit card also helps your credit score up
If you don’t use your credit, why would a credit card company give you another line of credit? It isn’t worth the time for the credit card company, and obviously it wouldn’t be good for yourself either. There would be no reason for most forms of credit to be available to you if you don’t use your credit card that often. Think this reasoning is conjecture on our part? It isn’t. The FICO scoring model rewards people who use their lines of credit.
If you have bad credit, you can rebuild it with a secured credit card
Secured credit cards are an excellent way for people with less than perfect credit to start the rebuilding process. Often you need look no farther than the bank where you have your checking account. Many national banks like Bank of America, Chase and Wells Fargo have secured credit card programs. To find out more, read our article about secured credit cards,
Credit is still a valuable resource for you to have. If you don’t have a credit card, you should get one, and start to establish your credit worthiness. A credit history is valuable, and you can’t have one if you never use your credit card.
How have you been handling your credit cards since the economic downturn? Tell us about it by leaving a comment!
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