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Home > Credit Card Articles > Charge Away, but Timely Pay
Charge Away, But TIMELY Pay — The Smart Way To Use Your Credit Card
As a Registered Investment Advisor and a CPA, you may think I’m crazy to advise you to charge as much as you can on your credit card. Yes, you read this correctly. Charge everything you can on your credit card! Charge for all your meals, consumer appliances, autos (to the extent an auto dealer will let you charge for your down payment on a car), travel and for virtually everything and anything else you can. The benefits of charging far out way the benefits of paying by cash.
For example, most credit cards give you additional extended warranty benefits, provide excellent year end documentation of your expenses (comes in handy during tax time), give you rewards according to the cards reward program, (cash back rewards are the best, by the way), give you the opportunity to dispute charges for dissatisfaction of service or goods, (have you ever had success getting your money back when you paid by cash?), and help improve your credit score.
Also, the more your charge, and the more times you pay timely, the more credit you will be awarded. However, (this is key), all these benefits only make sense if you have the discipline to pay off your credit card balances each month. Therefore, my credit card related slogan, if you will, is: charge away, but timely pay. You should never, ever carry a balance, (well, almost never ever). Most credit cards charge a very expensive interest rate and an even more expensive late fee if you fail to pay timely. This interest is considered to be consumer interest, which is not even tax deductible. It’s just wasted money.
The only time it may make sense to carry a small balance, for 60 days or so, is if you are trying to improve your credit beacon score (a scoring system the credit reporting agencies use to grade your credit worthiness). Carrying a small balance and then paying it off a month or two later, with some interest, actually improves your credit beacon score because this information is reported to the credit bureaus monthly. In today’s world, it is critical to have a good credit beacon score, so please be careful.
Charging away can be extremely beneficial to your credit score, and for obtaining the other benefits listed above, but its IMPERATIVE that you always timely pay. Therefore, if, and only if, you are capable of being extremely disciplined, then charge away, but timely pay.
For more information about how you can obtain a Rewards Credit Card, please click here.
By Woody Alpern
CPA and Registered Investment Advisor
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