Mentioning credit cards in a room full of people is bound to get a wide range of reactions. While some people avoid using credit cards out of fear of accumulating debt, others embrace the opportunity to have backup funds for financial emergencies.
The truth is that credit cards offer several benefits that can have a positive impact on your finances when you use them correctly. Checking out these 10 tips can help you determine if you’re maximizing the rewards that your credit line might have to offer for boosting your financial standing.
1. Prioritize Paying Your Balance In Full
Many people shy away from using credit cards due to wanting to avoid paying interest. While this is a valid concern, the truth is that you can avoid paying interest by repaying the balance in full each billing cycle. Simply viewing your credit card as an additional tool that you use for financial transactions can help keep balances and interest rates low, if not at zero.
2. Maximize Your Use of Rewards Programs
To reward borrowers for their loyalty, credit card companies tend to offer special promotions in the form of cash back, gas credits or travel points. Familiarize yourself with the rewards that a card has to offer. Knowing that you can get points for hotel stays or flights might help you decide to use your credit card for an upcoming trip. When you pay the balance back in full, you’ll receive discounts on your trip that make traveling more affordable.
3. Look for Cards With Signup Bonuses
Facing a major purchase sometimes creates the need for obtaining a new line of credit. When this happens, look for options that offer signup bonuses. Many of the major credit card companies offer cards with bonuses that provide you with cash back if you spend a certain amount in a specific period of time. When you know that you’ll need to spend several hundred or thousands of dollars on repairs or new appliances, then choosing a card with a signup bonus could help you save money off the total you pay.
4. Take Advantage of Purchase Protection Options
This credit card benefit is often overlooked by even the most financially savvy borrowers. Built-in protections can range from extended warranties to purchase protection that covers theft or certain types of damage. Fraud protection is another perk that is becoming increasingly beneficial regarding virtual transactions.
5. Boost Your Credit Score to Save Money On Future Loans
If you’re just starting out as an adult who needs to build their credit, then making payments on time is a great way to increase your score. Even people with a strong credit history can potentially benefit from obtaining a new card. For instance, you might find that your credit utilization goes down when your available limits increase.
6. Explore Potential Balance Transfer Benefits
High-interest credit cards are sometimes the only option for someone with no credit history or a low score. Once you build your credit, however, you may have newer and better options. Transferring your debt to a card with a lower interest rate can help you pay down the balance and enjoy better rates for future transactions.
If you choose to do this tip, then make sure to avoid adding more debt to the current balance. Paying off the full amount during the lowest interest rate period is the key to success.
7. Identify Lesser-Known Perks
Your cards might also have additional perks that you didn’t notice when you first signed up. Or, new ones might be available that you aren’t aware of yet. For instance, you might receive free checked bags as a benefit from airline cards. Or, you could enjoy cell phone protection when you pay the bill with a certain card. Checking for exclusive discounts helps you get even more savings from your card.
8. Avoid Late Fees With Automatic Payments
Your payment history is a significant part of your credit score. Even when you plan to pay the balance in full each month, your score could take a hit if you miss the payment due date. Setting up automatic payments ensures that your card’s minimum payment is always sent through on time. You can always log back into your account later to finish paying off the balance. But, this extra layer of security can help during emergencies or when you’re distracted by major life events.
9. View Credit Limits as Backup Funds for Emergencies
Receiving a notification that your credit limit has increased is exciting, and you can pat yourself on the back for doing great with demonstrating financial responsibility. But, it’s also important to resist the urge to make a big purchase to celebrate. Paying off your balance is easier when you keep it low. While you might need to rely on the higher limit when you have an unexpected need for borrowing funds, you’ll be glad you only use what you need to receive the most benefits from your card.
10. Use Credit Card Apps to Monitor Your Spending
As a final note, you can often find ways to track your spending through your credit card history. Many companies offer a breakdown of how you spent the funds when you set up a personal profile. Or, you might be able to see a chart of your spending on your monthly bill. Paying attention to how you use your card can help you find more ways to save money or apply perks to your purchases.
When you fill out credit applications, remember to always take a close look at the benefits that a card has to offer. Then, prioritize using the cards that provide you with the lowest interest rates and the highest rewards. Soon, you’ll begin to see how using your cards the right way can help you build better credit and save money to meet your financial goals for the future.