The credit card is often a double-edged sword. Going cashless has never been so easy, and neither has shopping; when you haven’t received your salary yet, just put it on the card and pay it back later!
These payments can stretch out over a long period, but it shouldn’t be a problem if you can afford the monthly payments—right? However, it can be easy to fall into a spiral of borrowing money and paying back with interest, giving you little opportunity to build up your savings.
Apart from slowing down with your credit card purchases until you’re debt-free, here are several reasons why you should prioritize padding your savings using a savings account with good interest rates:
- To Gain Financial Independence
If there’s one financial goal people should treat as a benchmark, then it shouldn’t be becoming wealthy or rich. People ought to strive to be financially independent, which means having a good amount of savings and steady income to finance not just the necessities of life but also your bigger personal goals.
It entails more than just scrapping around until your next paycheck; it allows you to call the shots and make the choices you want in your life without having to worry about your bank balance so much.
This could look like different things depending on who you’re talking to. For some, financial independence means being able to travel at their leisure, while for others, it could mean finally starting that business they’ve always dreamt of. One of the biggest goals for young people these days is to earn and save enough to retire when they want rather than working until retirement age.
- To Save on the Things You Purchase
People tend to charge everything to their credit cards, but most don’t observe the deadline or settle their payments in full every month. These interest charges will accumulate, and you’ll probably end up paying 50% more for what you buy than if you paid in cash. You should already be able to afford what you buy using your card and not the other way around.
You may feel stuck with the bank as your only option, but credit unions often offer some of the best savings account rates and are a great way to save. You can choose to take advantage of sales with your savings and buy more for less than what you would’ve paid using your credit card.
- To Build Credentials to Buy a Home
Putting in the downpayment for a home cannot be done using a credit card or a loan from someone else. At least 5% needs to be saved up before the bank can consider loaning you the rest for the mortgage.
Paying for the other fees after you’ve bought your home will also depend on your savings—so if you plan on buying a home in the future, you should be working on beefing up your savings starting now!
- To Be Debt Free
Getting yourself out of debt will require a good amount of money saved up to function as a reserve fund. Not only will it help you pay off your credit card, but should any unexpected incident occur that will cost a significant sum, you can depend on your reserve fund rather than swiping your credit card bill up another notch. Reserve funds will also serve as a warning when your spending gets out of hand.
If you’re dealing with several debts all at once, then debt consolidation is another option that you can take advantage of. It rolls multiple debts into just one single payment and is an excellent way to keep track of your debts, especially if they aren’t excessive yet and you have a good credit score to keep the repayment on track.
A credit card is certainly a useful addition to your financial freedom, but letting your spending and borrowing get out of hand will surely plunge you into debt that can be difficult to repay. By looking for ways to grow your savings, you’ll not only free yourself from debt but also attain the financial freedom that comes with spending responsibly. Growing your savings account is a sure way to secure yourself for the future. Here at Good Neighbors Credit Union, we serve individuals looking to build a strong financial foundation and those with better means who want a more accessible and stress-free banking alternative. Our services allow our members to manage their finances and leverage their full potential. Visit our website to enroll under new member sign-ups today!