How to Use Credit Cards to Your Advantage
Consider how the credit card will be used., Don't apply for too many credit cards., Resist the urge to open individual store accounts, even though the merchant may tempt you with a discount on your purchase., Look for cards with rewards that will be...
Step-by-Step Guide
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Step 1: Consider how the credit card will be used.
Where do you shop or dine most frequently, and which cards are accepted there? To use credit effectively, you will pay your balance on time, in full, every month; if you plan to do this, then don't be too concerned about the interest rate, APR, etc., since you will not be paying interest anyway.
Look for a card that has no annual fee. -
Step 2: Don't apply for too many credit cards.
It will be hard to keep track of them, and you might be tempted to over-extend.
But it doesn't hurt to have two or three of the majors (Visa, Master Card, American Express, or Discover) in case there is a problem with one, or a merchant doesn't accept the type you have. , (If you're making a really large purchase or need to rebuild or establish credit, open the account, get the discount, then pay the balance in full right away and close the account as soon as possible.) , Many credit cards have reward offers, but why earn merchandise or services you don't want or need? Frequent flyer miles are great if you travel a lot, but if you don't buy airline tickets, why do you need to rack up frequent flyer miles? Everyone can use cash back, and some cards offer cash back or account credit as an option.
Also look at gift cards as rewards; are they offered for merchants you patronize? If a gift card costs the same number of reward points as cash back, choose the cash because it is more versatile.
But if you can get more gift card credit than cash (for example, 45 points = $45 cash back or a $50 gift card to your favorite restaurant), choose the gift card and stretch those dollars. , Paying your balance on time, in full, every single month is the key to using credit cards effectively.
Set up automatic payments or create a system that ensures your bill will be paid in full every month before the grace period ends. , Question any errors or unauthorized charges.
Start with the merchant, but if unable to resolve, dispute with the credit card company. , Once you slip/pay late, make only the minimum payment, or pay less than the full current balance; interest starts accruing, and you are on "the interest train." When you are on the interest train, every new purchase you make accrues interest, and interest keeps accruing on the interest, like a snowball.
The only way to get off the interest train is to pay the account balance down to zero.
Do this online, on the phone, or in person so the transaction posts immediately.
If you mail a check, more interest will have accumulated by the time the payment is posted.
That little bit of interest will keep growing, and since you are still on the interest train, interest will be added to any new purchases you make with your card. , Some major cards that double as debit or ATM cards connected to your checking account may default to a cash advance for an ATM withdrawal.
Even though most cards offer a grace period for purchases, the grace period does not normally apply to cash advances, which start accruing interest immediately.
As soon as you notice the cash advance--between statements if necessary, especially if you plan to make more purchases on your card--pay your account balance to zero to get off the interest train. , It is a form of payment.
Don't charge something on your credit card if you will not be able to pay for it in full when the bill comes. , That way, you are only paying interest on your major purchase--not on the expenses of daily living. -
Step 3: Resist the urge to open individual store accounts
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Step 4: even though the merchant may tempt you with a discount on your purchase.
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Step 5: Look for cards with rewards that will be meaningful to you.
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Step 6: Make sure your credit card offers a grace period; the longer
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Step 7: the better.
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Step 8: Hang onto your receipts and reconcile them with your statement promptly.
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Step 9: Stay off the interest train.
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Step 10: Watch out for cash advances.
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Step 11: Don't view your credit card as a magic plastic wand.
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Step 12: If you must charge a large purchase to your card that you will not be able to pay for in full when the bill comes
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Step 13: stop using the card until the balance is paid off.
Detailed Guide
Where do you shop or dine most frequently, and which cards are accepted there? To use credit effectively, you will pay your balance on time, in full, every month; if you plan to do this, then don't be too concerned about the interest rate, APR, etc., since you will not be paying interest anyway.
Look for a card that has no annual fee.
It will be hard to keep track of them, and you might be tempted to over-extend.
But it doesn't hurt to have two or three of the majors (Visa, Master Card, American Express, or Discover) in case there is a problem with one, or a merchant doesn't accept the type you have. , (If you're making a really large purchase or need to rebuild or establish credit, open the account, get the discount, then pay the balance in full right away and close the account as soon as possible.) , Many credit cards have reward offers, but why earn merchandise or services you don't want or need? Frequent flyer miles are great if you travel a lot, but if you don't buy airline tickets, why do you need to rack up frequent flyer miles? Everyone can use cash back, and some cards offer cash back or account credit as an option.
Also look at gift cards as rewards; are they offered for merchants you patronize? If a gift card costs the same number of reward points as cash back, choose the cash because it is more versatile.
But if you can get more gift card credit than cash (for example, 45 points = $45 cash back or a $50 gift card to your favorite restaurant), choose the gift card and stretch those dollars. , Paying your balance on time, in full, every single month is the key to using credit cards effectively.
Set up automatic payments or create a system that ensures your bill will be paid in full every month before the grace period ends. , Question any errors or unauthorized charges.
Start with the merchant, but if unable to resolve, dispute with the credit card company. , Once you slip/pay late, make only the minimum payment, or pay less than the full current balance; interest starts accruing, and you are on "the interest train." When you are on the interest train, every new purchase you make accrues interest, and interest keeps accruing on the interest, like a snowball.
The only way to get off the interest train is to pay the account balance down to zero.
Do this online, on the phone, or in person so the transaction posts immediately.
If you mail a check, more interest will have accumulated by the time the payment is posted.
That little bit of interest will keep growing, and since you are still on the interest train, interest will be added to any new purchases you make with your card. , Some major cards that double as debit or ATM cards connected to your checking account may default to a cash advance for an ATM withdrawal.
Even though most cards offer a grace period for purchases, the grace period does not normally apply to cash advances, which start accruing interest immediately.
As soon as you notice the cash advance--between statements if necessary, especially if you plan to make more purchases on your card--pay your account balance to zero to get off the interest train. , It is a form of payment.
Don't charge something on your credit card if you will not be able to pay for it in full when the bill comes. , That way, you are only paying interest on your major purchase--not on the expenses of daily living.
About the Author
Kenneth Diaz
Committed to making crafts accessible and understandable for everyone.
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