For the most part, credit cards have been around for a long time and it seems like everybody uses one in their everyday lives. However, people use credit cards in very different ways.
Every spender has their own style and their own reasons for why they use cards the way they do. There are multiples types of card users but each user has a different approach to using these credit cards which come with their own benefits and disadvantages.
How do you use your credit cards? Think back over the last month.
- Did you use your credit card for small daily purchases or a big splurge?
- Did you use your credit card at all?
- Do you pay the minimum every month?
- Do you pay your debt off in full every month?
- Do you understand the ins and outs of your credit card contract, bonuses, and rewards programs? Do you have only a general idea of how credit cards work?
- What’s your credit rating score?
Now that you’ve thought about your credit card habits, it’s time to look at which of the three types you fit into.
Playing it Safe
The people who take this approach usually buy whatever they seem necessary in that month. When they get their paycheck, they immediately pay off their credit card debt in full. By being able to take a responsible action like this, interest won’t build up on their card balances, which in turn raises their credit score as lenders see them as less risky.
This group tends to have excellent credit scores. They also typically make the most use out of credit card bonuses such as movie tickets, cashback incentives, etc. The downside of this which might affect some people taking the safe approach is that they won’t have as much cash on their person since most of it went to paying off credit cards or other debts. Their smaller bank account balance is because their money went to paying off debts.
Rolling Debts Over
Another approach is people who only pay the minimum balance on their credit card statements each month. In some cases, it could be because money is too tight in the short term to pay more. Some people who only pay the minus balance won’t understand how much of their money is going to interest rather than the principle of the credit card balance. The problem with this approach is that these card users could go on and repeat the same habits thus prolonging their savings and future goals.
The one advantage here for people who do this is that they can buy their expensive items which they do not have the cash for, or just have the ability to stay afloat during hard financial times. The disadvantages are that they may have a low credit rating and will end up paying far more over time.
NEXT: The Most Common Users – Is It You?
Dana George-Berberich is a freelance reporter and novelist. She has written finance articles for newspapers across the country and for companies like Dun & Bradstreet and Bankrate.
