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Should you buy things using a credit card?

Is it a good idea to buy things with a credit card?

Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Group (ASX: WBC), Australia and New Zealand Banking Group (ASX: ANZ) and National Australia Bank Ltd (ASX: NAB) would all say yes.

If you pay off your credit card balance every month forever without fail then it certainly can’t be described as a negative for a person doing that. At a minimum you would get an improved cashflow compared to paying with a debit card.

You supposedly also get better protections with your purchasing and some cards also provide insurance.

Of course there’s also the promise of earning reward points. How much are Qantas Airways Limited (ASX: QAN) frequent flyer points or Virgin Australia Holdings Ltd (ASX: VAH) velocity points actually worth these days? Not as much as the past.

The most important thing to remember with a credit card is that the money or credit limit isn’t actually yours. A credit card’s benefits is only useful if you don’t spend additional money compared to how much you would have spent if you didn’t have a credit card.

Some money experts like to paint credit cards as a positive, particularly in the US where they can yield plenty of free travel. But there’s losers on the other side of that equation.

If you don’t pay off your credit card entirely on-time every time then you’ll be paying high interest rates.

Most people cannot guarantee that they won’t ever run into financial trouble. So far that reason, I’d say that most people are better off without credit cards to begin with. There’s nothing wrong with paying cash or a debit card for everything you buy.

Instead of credit cards, I think owning shares of businesses are the best way to accelerate your finances. Some particular ASX share growth ideas to consider are these ones which have been great over the past decade.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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