Using Your Credit Card as a Financial Tool

At Integris Wealth Management, we believe that financial wellness isn’t just about long-term investing; it’s also built on smart, everyday financial decisions. One of the most misunderstood financial tools in many people’s wallets is their credit card. When it comes to revolving debt, Individuals tend to fall along a spectrum . On one end, there is a strong aversion driven by concerns over high interest rates and financial strain. On the other, some embrace the strategic use of credit to earn rewards such as cash back and other benefits.

When used wisely, a credit card can be much more than just a convenience. It can be a powerful tool to build credit, unlock valuable rewards, and improve overall cash flow.

Understand the Basics: Treating a credit card like a debit card

Where people run into trouble is making a purchase and failing to pay it off monthly. That’s when interest rates kick in, and over time, those charges can do considerable damage to your finances and your credit score. But when used correctly, it can be an underrated asset to a financial toolbox.

Using a credit card like a debit card is one strategy that can allow a user to realize the upside without exposing them to the risks of using debt for big purchases. Using debt for big purchases can be very valuable, especially on something like a home. Where it becomes a risk is with purchases that don’t necessarily grow, like furniture or clothing. Being cautious about making payments on time is good practice. Common features like autopay can help make this a seamless process.

By limiting the downside with this approach, a user can get the benefits of using the card (rewards, fraud protection, building credit), without the risks of being encumbered with debt.

Establishing Goals Before Picking a Card

Knowing how to use a card is only half of the battle in becoming a wise credit card user. The other half is identifying the right goals:

Are you looking for:

• Cash back on everyday purchases?
• Travel rewards like airline miles or hotel credits?
• Balance transfer options to pay off debt?

With hundreds of options and enticing offers available, it can be easy to lose sight of those goals. Better rewards don’t always mean a better deal. Many high-reward cards come with high annual fees, limited redemption options, or spending categories that don’t align with your lifestyle.

Things to Look Out For

Annual fees are a big consideration. Many people get excited about a card’s perks without realizing they’re paying $95, $250, or even more each year regardless of whether they are taking advantage of the benefits.

If the perks tied to the card and its fee are being used, then they can potentially be a value-add. For many people, a no-annual-fee credit card that offers solid cash back on purchases like groceries, gas, or dining is the better long-term choice.

Also, be cautious about closing credit cards, especially older ones. The oldest card in a wallet is important because it gives the longest credit history. Closing the oldest card can negatively affect your credit score by shortening your credit history and raising your credit utilization ratio. So it’s better to choose the right card up front than try to swap later. Swapping can be as simple as getting in contact with the credit card provider and swapping the current card to one with rewards that better suit the user. This avoids any potential issues that come with closing a card.

Turning Everyday Spending into a Value Add

Let’s say you spend $10,000 a year on groceries, and you have a card that gives 3% cash back at grocery stores. That’s $300 back in your pocket for something you were going to buy anyway.

This is the real power of credit cards: turning required spending into added value. If you’re going to spend the money anyway, why not earn something in return?

Final Thoughts: Credit Cards as a Financial Tool

Credit cards sometimes get a bad rap, and for good reason when misused. But when approached with the right mindset and financial habits, they can be a strong ally in your broader financial plan.

The information provided herein is for educational purposes only, and should not be construed as advice, including, but not limited to tax, legal, insurance, investment, or retirement advice. For your specific planning needs, please seek the advice of Integris Wealth Management, your tax accountant, attorney, insurance agent, or other professional as appropriate. Investing involves the risk of loss.