Can a Credit Card Help You Financially?

A lot of personal finance experts will tell you that using a credit card is among the worst things you can do to yourself financially. The interest rates are exorbitant, and they lead to people spending money they cannot afford. The experts tell you to only spend cash, since that way you cannot spend more money than you have.

But can a credit card actually help you financially, rather than hurt you? If you can manage fiscal discipline, the answer is yes.

Start by establishing a single credit card account, one with no annual fee, a 30-day grace period, and that preferably pays a cash-back award.

Whenever you are out shopping and you want to buy something, use the same fiscal discipline as the people who only pay cash: only buy things for which you have cash on hand. Then, when you get home, go online and transfer the exact amount of the purchase into an interest-bearing account. A high-yield money market savings account would be ideal.

When your monthly credit card statement arrives, transfer the money back out of your interest-bearing account to your checking account and make the payment. Better yet, use an online bill pay feature that lets you transfer your payment directly from the interest bearing account. That way, you can leave the money in the account a few extra days and earn a tiny bit more interest.

In addition to earning the interest on the amount of your payments, you should also be getting a cash-back bonus. If you can manage financial discipline, this is a plan that results in getting interest for using a credit card instead of paying interest.