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When should you use a credit card?

While credit cards can provide a lot of benefits when used strategically, it’s hard to know when you should and shouldn’t be using a credit card.

I’ve put down a few key things to consider before you dive into the world of consumer lending and sign that dotted line for your new plastic.

What should you put on the credit card?

The best way to maximise your credit card usage is to put regular expenditure such as groceries and various bills to make sure you’re regularly racking up rewards points.

The real argument here is that you could spend your hard-earned cash immediately with your debit card, or put the same expenditure on your credit card, keep your cash for longer, and get the benefits.

Most credit cards by their very nature allow you a non-repayment period of 30 or 60 days, meaning you can continue earning interest on that cash in the bank or put it towards buying ASX shares.

It is important that if you are to go down the credit card spending route, that you have a process in place to pay off any debt before the repayment period is due.

If not, the risk is that you’ll be slugged with a 20% or more interest rate on the balance and the benefits reaped from your credit card spending will quickly be outweighed by the fees incurred.

How can you make the most of your credit card?

By putting more of your regular spending onto a suitable credit card, you can start putting more of your hard-earned cash towards ASX stocks.

While earning interest income from the bank in the meantime, you’ll also have more money to put towards building up your share portfolio with that extra cash.

Credit card spending can afford you the luxury of having your own cash in your account for an extra 30 or 60 days, meaning you can buy when you want to buy.

If you’re interested in consumer credit products, you could look at using the “buy now, pay later” services offered by Afterpay Touch Group Ltd (ASX: APT) or even better, invest in the company’s shares!

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Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO. The Motley Fool Australia has no position in any of the stocks mentioned. 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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