Make Credit Cards Work for You, Not Against You



A credit card can be a valuable tool if you know how to use it properly. Likewise, using credit cards irresponsibly can lead to a world of hurt.

There are many benefit of credit cards if you are disciplined with your spending, pay your card balance off in full every month and understand how credit cards work.

If you are not disciplined and find your credit card too tempting, then you might be better off cutting it up.



Credit cards can get you into financial problem, particularly if you are an impulse buyer. And of course, if you already owe money on your credit card, then paying it off should be your top priority.

Using a Credit Card and repaying on time provides a boost to your credit score. A good credit score means you will be able to obtain Loans and Credit Cards quickly in the future. It's one of the Credit Card benefits cash or cheques cannot offer!



How to benefit from your credit card

A credit card can be a valuable tool if you know how to use it properly. Likewise, using credit cards irresponsibly can lead to a world of hurt.There are many benefit of credit cards if you are disciplined with your spending, pay your card balance off in full every month and understand how credit cards work.If you are not disciplined and find your credit card too tempting, then you might be better off cutting it up.Credit cards can get you into financial problem, particularly if you are an impulse buyer. And of course, if you already owe money on your credit card, then paying it off should be your top priority.Using a Credit Card and repaying on time provides a boost to your credit score. A good credit score means you will be able to obtain Loans and Credit Cards quickly in the future. It's one of the Credit Card benefits cash or cheques cannot offer!

Eliminate Annual Fees

You likely looked into this before you applied to your current card of choice, but is your credit card still free to own? Many institutions started charging annual fees, and there's a chance that yours does now as well. With companies likely adding the annual fee as a line item on one of your monthly bills, it may go unnoticed, so double check to make sure.



Pay Your Balances Off Each Month

I contemplated whether to put this one in, because it's obvious. But it's so important that everyone needs to hear this again and again. Don't use a credit card unless you can pay it off each month. Got it? Now go read it again, and follow the rules.

If you don't believe that it's possible to live without borrowing, just remember that people were fine before the invention of debt! If you can't afford it, just don't buy it.



Extended warranty benefits

You want to purchase the extended warranty on expensive electronics, but spending extra money isn't an attractive option. If you use the right credit card, you can automatically get an extended warranty and save that money. Check your credit cards before you shop to learn whether any of your cards have extended warranty coverage and what you have to do to take advantage of the benefit. Keep your purchase receipt for the duration of the warranty so you easily can submit a claim in the event of a product failure.



Signup bonuses

Several credit cards offer attractive bonuses that reward you for signing up with them, such as large amounts of bonus points, complimentary flights, low or nonexistent fees and other long-term perks, such as promotional and reduced interest rates.

However, not all cards with a signup bonus are good value, so you need to have a close look at the terms and conditions before applying. Chances are, there will be certain requirements that need to be met, such a minimum expenditure in the first few months. If these requirements are in line with your spending habits, then a credit card with a signup bonus can be excellent value.

You can read the article below to see what high-rated credit cards are currently offering signup deals, or you can look directly in the table below.



Transfer balances to reduce your interest rate

If you're currently carrying a balance on a credit card with a high interest rate, you can save hundreds of dollars by transferring that balance to a credit card with a lower interest rate. Taking advantage of a 0 percent APR balance transfer offer will save you even more money as you can avoid paying interest for up to 21 months depending on the credit card you choose. For example, you can save almost $400 by moving a $3,000 balance at 17 percent to a credit card with a 0 percent APR for 12 months, if you can pay $251 each month.



Stick With Cash-Back Rewards You likely looked into this before you applied to your current card of choice, but is your credit card still free to own? Many institutions started charging annual fees, and there's a chance that yours does now as well. With companies likely adding the annual fee as a line item on one of your monthly bills, it may go unnoticed, so double check to make sure.I contemplated whether to put this one in, because it's obvious. But it's so important that everyone needs to hear this again and again. Don't use a credit card unless you can pay it off each month. Got it? Now go read it again, and follow the rules.If you don't believe that it's possible to live without borrowing, just remember that people were fine before the invention of debt! If you can't afford it, just don't buy it.You want to purchase the extended warranty on expensive electronics, but spending extra money isn't an attractive option. If you use the right credit card, you can automatically get an extended warranty and save that money. Check your credit cards before you shop to learn whether any of your cards have extended warranty coverage and what you have to do to take advantage of the benefit. Keep your purchase receipt for the duration of the warranty so you easily can submit a claim in the event of a product failure.Several credit cards offer attractive bonuses that reward you for signing up with them, such as large amounts of bonus points, complimentary flights, low or nonexistent fees and other long-term perks, such as promotional and reduced interest rates.However, not all cards with a signup bonus are good value, so you need to have a close look at the terms and conditions before applying. Chances are, there will be certain requirements that need to be met, such a minimum expenditure in the first few months. If these requirements are in line with your spending habits, then a credit card with a signup bonus can be excellent value.You can read the article below to see what high-rated credit cards are currently offering signup deals, or you can look directly in the table below.If you're currently carrying a balance on a credit card with a high interest rate, you can save hundreds of dollars by transferring that balance to a credit card with a lower interest rate. Taking advantage of a 0 percent APR balance transfer offer will save you even more money as you can avoid paying interest for up to 21 months depending on the credit card you choose. For example, you can save almost $400 by moving a $3,000 balance at 17 percent to a credit card with a 0 percent APR for 12 months, if you can pay $251 each month.





Invest Your Cash Back

You can put cash-back rewards to work for you and invest the money - even if you earn less than a few hundred dollars. Thanks to the power of compounding interest, your cash-back rewards will grow into a sizable nest egg over time.

Let's say you earn $300 in cash back every year. If you invest that $300 into an account that earns 7 percent interest annually, in 10 years your balance will grow to more than $4,000.

As an added credit card benefit, some rewards credit cards allow card owners to link their cards to eligible investment accounts. Take the Fidelity Rewards Visa Signature credit card: You can earn unlimited 2 percent cash and have those rewards automatically deposited into an eligible Fidelity account, such as a brokerage account, a 529 college savings plan, a retirement account and more.

To maximize your investment earnings, look for credit cards with no restrictive categories. The more restrictions, the fewer opportunities to cash in and invest your rewards.



Cashback

As opposed to Rewards cards, which earn you points for spending money on certain things, cashback cards pay the money back into your account. These cards will save you money based on your monthly expenses, and the amount you’ll get back will depend on the credit card’s cashback rate. The right card will earn anywhere from 1% to 5% back on your purchases. Depending on where you shop, certain places will even give higher rates of up to 10% for certain purchases during bonus periods.



Know All the Benefits You Are Getting.

It's always a good idea to know every benefit that your card is providing. In addition to reward points, some cards get you into airport lounges, while others will double the warranty of a product. By knowing all the benefits, you won't be paying extra for something that you can get for free. For example, one of my credit cards provides rental car insurance.



Write Down Why You Applied for the Card in the First Place.

A good way to remember all those benefits is to actually write them down in simplified form somewhere, so you can look at it once in a while to refresh your memory. I know it is a bit of work, but I applied for one of my cards eight years ago. Would you remember all the details from eight years ago? Or let's say you applied for a 0% balance transfer credit card. Now that the introductory 0% APR period is over, do you still need to keep it?



Take advantage of all the rewards you can.

Those who have the most to gain from credit cards are the people who master the art of credit card rewards. The best rewards credit cards offer an array of benefits, including cash-back, hotel loyalty points, and frequent flyer miles — that can be earned just for using your card for regular expenses such as groceries or the cable bill.

Credit card rewards become a lot less lucrative when you’re paying interest on your purchases because you’re carrying a balance. To avoid that misstep, only pursue credit card rewards if you know for a fact that you can pay your balance in full. If you don’t know that for sure, those rewards probably won’t be worth it.



Complimentary travel insurance There are zillion different ways to redeem credit card rewards, but it's probably best to stick with getting cash (or perhaps a statement credit) unless you were going to need to use it anyway. For example, getting a free airline ticket is good if you were going to buy the exact same ticket for the exact same price, but getting a $50 gift card and ending up buying $73 worth of useless junk is not worth it.You can put cash-back rewards to work for you and invest the money - even if you earn less than a few hundred dollars. Thanks to the power of compounding interest, your cash-back rewards will grow into a sizable nest egg over time.Let's say you earn $300 in cash back every year. If you invest that $300 into an account that earns 7 percent interest annually, in 10 years your balance will grow to more than $4,000.As an added credit card benefit, some rewards credit cards allow card owners to link their cards to eligible investment accounts. Take the Fidelity Rewards Visa Signature credit card: You can earn unlimited 2 percent cash and have those rewards automatically deposited into an eligible Fidelity account, such as a brokerage account, a 529 college savings plan, a retirement account and more.To maximize your investment earnings, look for credit cards with no restrictive categories. The more restrictions, the fewer opportunities to cash in and invest your rewards.As opposed to Rewards cards, which earn you points for spending money on certain things, cashback cards pay the money back into your account. These cards will save you money based on your monthly expenses, and the amount you’ll get back will depend on the credit card’s cashback rate. The right card will earn anywhere from 1% to 5% back on your purchases. Depending on where you shop, certain places will even give higher rates of up to 10% for certain purchases during bonus periods.It's always a good idea to know every benefit that your card is providing. In addition to reward points, some cards get you into airport lounges, while others will double the warranty of a product. By knowing all the benefits, you won't be paying extra for something that you can get for free. For example, one of my credit cards provides rental car insurance.A good way to remember all those benefits is to actually write them down in simplified form somewhere, so you can look at it once in a while to refresh your memory. I know it is a bit of work, but I applied for one of my cards eight years ago. Would you remember all the details from eight years ago? Or let's say you applied for a 0% balance transfer credit card. Now that the introductory 0% APR period is over, do you still need to keep it?Those who have the most to gain from credit cards are the people who master the art of credit card rewards. The best rewards credit cards offer an array of benefits, including cash-back, hotel loyalty points, and frequent flyer miles — that can be earned just for using your card for regular expenses such as groceries or the cable bill.Credit card rewards become a lot less lucrative when you’re paying interest on your purchases because you’re carrying a balance. To avoid that misstep, only pursue credit card rewards if you know for a fact that you can pay your balance in full. If you don’t know that for sure, those rewards probably won’t be worth it.