Credit cards: Friend or Foe to Your Finances?

Blog Highlights

• Benefits: Learn how to use credit cards as a financial tool to build credit, earn rewards, and enjoy greater flexibility and fraud protection.
• Risks: Understand how overspending, interest charges, and hidden fees can turn credit cards into a financial burden.
• Smart Use: Discover practical tips for using credit responsibly so you can enjoy the perks without falling into debt.

Credit cards sometimes get a bad rap, but the truth is, whether they are your friend or foe really depends on how responsibly they are used. While some people choose to avoid credit cards completely, others see them as essential. Credit cards can be either a helpful tool or a financial trap, so the key is to use them wisely. Here are some benefits of using credit cards responsibly as well as the risks involved when they are misused.

Credit Cards as a Powerful Financial Tool

• Build Credit: Making on-time credit card payments and keeping your balances low is the key to establishing a strong credit score.
• Rewards and Points: Many credit cards, such as those offered to Members here at MPCU, offer reward programs for their credit card holders. From cash back and travel rewards to other financial perks, they can really give value when used wisely.
• Fraud Protection: One of the great advantages to using a credit card for payment versus a debit card is the stronger protection against fraud. Credit cards come with network policies and federal laws with better liability limits, as well as a dedicated fraud department to help when there is an issue.
• Emergency Situations: Having a safety net when unexpected expenses arise is a definite benefit of having a credit card. Knowing your Members Plus credit card is there when you need it gives you peace of mind that you will have access to the funds you need to get you through your unexpected financial situation.
• Financial Flexibility: Using a credit card is convenient for everyday purchases and travel. It allows you to easily keep track of your expenses and eliminates the need to carry cash. In addition, if you are using a rewards card, you will reap those benefits, too. Just be sure to pay off the balance each month to avoid unnecessary credit card debt.

Credit Cards as a Dangerous Weapon

• Overspending: The main issue with credit cards is that they are so convenient to use, which makes it extremely easy to overspend. Maxing out cards or juggling too many accounts not only hurts your credit score, but it also leads to expensive monthly payments you might not be able to afford.
• Minimum Payment Trap: Don’t fall into the minimum payment trap when paying your monthly credit card bill. While the minimum payment amount is technically all you are required to pay, the balance keeps accruing interest and paying only the minimum payment keeps you in debt longer.
• Carrying a Balance: Keep in mind that any purchase made on a credit card will end up being more expensive due to the interest that is added to the balance. Interest adds up quickly, meaning that $20 purchase could end up costing you $75 or more if interest accrues for several months before you pay it off.
• Fees Everywhere: It is important to “shop” for credit cards instead of simply accepting random pre-approved credit card applications delivered to your mailbox. Things to look for include annual fees, late fees, and over-limit fees that can quickly eat into your budget without you even realizing it. The best source for credit cards with good rates and superior customer service is your local credit union.
• High Interest Rates: Despite all the wonderful reward programs and credit card perks available today, the most important thing to pay attention to when using a credit card is the interest rate. High-interest rate credit cards can really wreck your budget and add excessive interest when you carry a balance. Members Plus Credit Union offers some of the lowest interest rate credit cards for Members and invites you to compare rates and learn more about responsible use.

How Gen Z Can Use Credit Cards Wisely.

Getting a credit card is a smart choice only if you use it wisely. Here are some practical tips to help Gen Z make the best choices when using credit cards.

• Start with one card and use it for small, manageable purchases.
• Always pay off the balance in full each month.
• Set up autopay to avoid late fees.
• Keep track of spending with mobile banking or budgeting apps from MPCU.

Make Credit Cards Your Friend with Smart Spending Choices

Credit cards are neither good nor bad; they truly are what you make them. Using credit cards responsibly allows you to reap the benefits they offer while avoiding the pitfalls that can also be associated with the misuse of them. Making smart money moves is the key to proper credit card use. We invite you to learn more about your credit card options at Members Plus where you can also chat with our friendly and knowledgeable customer service team about which MPCU credit card option is best for your unique situation.