Can Your Credit Card Be Your Friend?

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If your spending habits have changed, along with your credit scores (hopefully favorably) since paying off credit card debt, rewards credit cards that earn vacation miles or cash back for an emergency fund could be a good choice for you.

These credit cards usually require a credit score of at least 690. They can earn points, cash back, or airline miles in specific categories or on day to day expenses. Rewards rates depend on the card. Some of them also offer sign-up bonuses with zero interest for new cardholders at the beginning.

Rewards can be redeemed for travel, cash, gift cards, statement credit, or merchandise depending on the card. All of these can help reduce household expenses. Don’t forget you have to pay your credit card off in full every month to avoid interest costs racking up.

Paying off debt is worthwhile

Debt repayment is a worthwhile goal. However, if you decide to stop using a credit card later, this could hurt your credit scores. That’s because the length of credit history and credit utilization are key factors in the calculation of credit scores.

For example, you want to close an older credit card with a high limit after paying it off, or that you use the card so rarely that the issuer decides to close your account. As a result, you lose both the card’s account history and a certain amount of total available credit.

The credit mix is another factor in your credit scores — the combination of different types of credit accounts. A good credit mix might include a car loan or mortgage apart from credit cards.

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