It’s easy to focus on the harms credit cards can cause us. But that’s actually quite unfair because, if you look at it, credit cards are just neutral personal financial utensils. That’s what they are, they are simply tools we can use effectively. And just like with any tool, you can do something good with it or you can abuse it. It’s not the tool (the credit card) that’s the problem but the person using the tool – that’s the bottom-line.
Credit cards can help you in many ways, but surprisingly they can also help you when April 15 rolls around each year. Here are some hidden tax benefits of using a credit card.
Each year we file our taxes and eagerly anticipate receiving a tax refund. Even though it’s your own money you’re getting back, it still feels like a bonus of some sorts. But many people actually rely on their tax refund each year to get themselves out of a bind or pay past due bills. The reason people get into these types of problems is because they do not budget their money every month.
Everybody should have a budget. It doesn’t need to be anything special. You can make it on paper, on a spreadsheet or using one of the many free smartphone apps.
How does this apply to credit cards? By using your credit card you will have a report on your monthly expenses already created for you. This of course is only true if you make all of your purchases using your credit card. By clearly seeing what you spend per month and what you spend it on, you can properly budget your income.
Easy Paper Trail
When you are a busy business person or you’re just a busy person, you don’t have the time to track down (or keep) all of your receipts. You also don’t have the time to record every transaction that you do.
So if you are either disorganized or you get confused easily, or you just want an easier system of tracking all your business expenses, or for that matter personal expenses, then it will be more convenient for you to use a credit card.
The great thing about credit cards is that not only do they sent you a monthly billing statement that is easy to understand and well organized; but also, if you miss out on a particular statement, you could always dial an agent’s number and get a copy from your credit card company of a past billing statement.
Let’s say you make a large purchase in the middle of the previous year. It’s an $850 expense and you see it on your credit card. However, you have no idea what you bought. You wonder if this was a personal expense or a business expense. You wonder if what you bought could somehow be a tax deduction.
Well wonder no more because in your credit card statement you’ll find the name and phone number of the vendor. You can then contact them or look them up on Google and find out exactly what their business is. That will surely jog your memory about what you may have purchased. For all you know, that expense was those energy saving windows you bought which qualify for a tax credit.
If during a tax audit you need an actual receipt rather than just a charge on a credit card statement, you could contact the vendor and ask them if they can produce a receipt for you. You’ll be able to tell them the date and amount of your purchase and get the proof you need – all because you made the purchase on your credit card.