Credit Cards 101: Let’s delve into the basics of credit cards. Many of you possess both credit and debit cards, but it’s crucial to understand the distinctions and make necessary adjustments in your spending habits. Grab a pen and paper as we explore three key aspects:
1. Qualifying for Your First Cards: If you aspire to be an entrepreneur and build wealth, waiting until you accumulate significant cash is not the right approach. The delay could tie your business to your social security number as a sole proprietor, causing complications later on. Form your corporation now and avoid the hassle of reconfiguring everything down the line.
2. Choosing the Right Cards: Selecting the appropriate cards is essential for maximizing benefits. Opt for well-established institutions like Discover, American Express, Chase, and Citibank. These cards offer various perks, including points that can be valuable for paying rent or mortgage. Choose cards strategically based on your spending patterns and financial goals.
3. Dispelling Credit Card Myths: There are common misconceptions about credit cards and debt that need debunking. Contrary to popular belief, having active credit and some debt is beneficial. It’s a tool for demonstrating financial responsibility and can open doors to increased lines of credit. The financial system rewards those who actively manage and use credit wisely.
After this overview, I encourage you to delve deeper into the nuances of credit cards by binge-watching related videos on my channel. The link is provided below. Your financial education is an ongoing process, and this foundational understanding is just the beginning.
Common Mistakes to Avoid: Now, let’s address some prevalent mistakes individuals make with credit cards:
1. Incorrect Application Approach: Applying for credit cards requires strategic planning. Instead of detailing your current income, project your anticipated income for the next 12 months. This proactive approach positions you for higher credit limits, aligning with your financial goals.
2. Optimal Card Utilization: Rather than paying off all your cards at once, consider a strategic approach. Utilize all your cards throughout the month, paying them off systematically. This method maintains an active presence in the financial system and demonstrates responsible credit management.
3. Embrace Credit, Avoid Unnecessary Debt: Contrary to the notion of being completely debt-free, actively using credit cards is an investment in your financial future. Smart credit usage, combined with responsible spending and repayment, builds a positive credit history, essential for obtaining favorable terms in the financial landscape.
In conclusion, subscribe to my channel for ongoing financial insights, and don’t forget to explore the extensive library of credit-related content. Your journey to financial literacy is a continuous process, and I’m here to guide you every step of the way.
Debit Cards
In my opinion, it’s the worst financial tool given to the consumer. A while back, I pondered on a simple question: How can I eliminate 99.9% of my personal liability? The answer was clear—use the safest form of payment on Earth, a credit card (Visa, Mastercard, American Express, or Discover).
Every day, I spend using the credit card, not my money. My funds sit in a secure money market account, earning interest, and are shielded from exposure. Whether it’s groceries, fuel, or international travel, I rely on my credit card. The beauty is, if I pay the bill in full or partially, my credit score goes up, building credit effortlessly.
The key lies in understanding that using a credit card doesn’t expose you to personal liability. Federal law ensures that, in the rare event of fraudulent activities, my liability is zero. Contrastingly, with a debit card, you’re continually exposing the money in your account, making you vulnerable.
Moreover, when it comes to online shopping, I use my credit card without worry. In case of delivery issues, damaged goods, or fraudulent websites, my liability is absolutely zero. In contrast, using a debit card leaves you liable for a certain amount, and rectifying issues can take an extended period.
This philosophy extends to teaching YOU about credit and YOU teaching your children early on. Rather than providing your children with debit cards, Help them to secure credit cards. As a guarantor, you will receive the bills, set spending limits, and, most importantly, ensure their credit scores benefit from timely payments. By the time they graduate they’ll have an excellent credit scores, empowering them to make significant financial decisions without my assistance.
In today’s world, where everything, from job applications to insurance, is influenced by credit scores, instilling good credit habits early on is one of the most valuable lessons you can offer your children.