You have a lot of enemies when you use your credit card. Obviously, your main enemy is the interest rate your credit card company charges. In fact, the credit card company is hoping that you don’t pay off your balance so they can ding you with interest charges. Talk about dying from a million tiny cuts.
Interest charges start small but as you rack up your balance, the interest charges can reach a level where it seems like whatever you do to pay off the balance, you just can’t. You simply got in over your heard. Don’t let this happen to you. Make sure you pay off your balance every month. Of course, the best solution is to lay off the plastic in the first place.
The second enemy you fight with your credit card is the fact that inflation is actually eating up your money. If you store your money in a savings account so you can draw from it to pay your credit card bills, that money is not appreciating in value before you spend it on your credit card debt. Thankfully, there is a way to beat inflation with your credit card. You can buy assets.
While assets take many different forms, we’ll just focus on an abstract asset since many different people have different conceptions of assets. An asset to you might not be an asset to another person. At the most basic level, an asset is something that generates income. After this definition, most people disagree as to what an asset it. Still, this is one key common trait any asset has-it generates income.
The good news is that you can use your credit card to buy an asset. As long as the asset generates more money than the interest rate of the credit card and pays off the credit card’s balance, your acquired asset is doing its job. Once it has fully liquidated its cost, your asset produces net income and this helps you beat inflation because whatever money it generates is a net positive. Its’ cost of acquisition has been paid off already. In this situation, you can use your credit card to not only beat inflation but also build your income flow.
Remember, the analysis above is based on comparing putting the money you used for your asset in a savings account and using a credit card to buy the asset. In this situation, inflation will eat up your saved, uninvested, cash while using your credit card to buy the asset helps you gain an income stream without putting any money out.