Many people hate credit cards, but in reality, if they are used correctly, they can be very beneficial to you financially. I’m actually one of those folks who have pledged their love for credit cards with my own strong reasons. But granted, it’s a polarizing subject for many. The reality is that by exercising discipline when using a credit card, you can avoid falling into credit card debt and instead enjoy your card as the financial tool it was intended to be used. Here are some simple guidelines you can follow to ensure that you get the benefits and avoid the pitfalls that many encounter with credit cards.
Easy Credit Card Management Tips
1. Find a great credit card.
Not all credit cards are created equal. Many have hidden fees and outrageous interest rates. Unfortunately, many cards are loaded with fees. When selecting a new credit card, you want to look at the interest rate, annual fee, cost of over-the-limit and late fees, and where you can use the card. Of course, a low interest rate credit card (one that sports anything below 9.9%) is going to be a better deal than one that carries a 14.99% rate. In addition, I would also suggest avoiding cards that have annual fees (although there’s a movement afoot among card issuers to consider applying more of this type of fee in the future). You should not have to pay to have a credit card.
Image from Jehzlau-Concepts.com
When choosing a card, also be sure to think about where you plan to use it. If this is going to be a card that you want to use at restaurants, stores, and vendors, you may want to consider the fact that although they have solid rewards programs, Discover Card and American Express are typically not accepted everywhere.
Finally, be sure to select a card that does not charge excessive over the limit fees or late fees. Where do you find this ideal card? A great place to start is a local credit union. Credit unions typically offer better rates on credit cards and charge zero to very low fees.
2. Read your credit card statement every month.
Be sure to review your credit card statements every month. The great thing about credit cards is that everything is itemized and associated with a phone number if there is any question. If you find a charge on your statement that you do not recognize, simply call your credit card company and inform them. I will say, by far, that American Express is the easiest company to work with when it comes to disputing a charge or fraudulent activity on your account. They even have an online application where you can dispute a charge on your card. I’ve actually had a couple of occasions where I needed to dispute a charge but American Express made this process easy and quick for me.
3. Do not use your card for ATM withdrawals or cash advances.
If possible, you want to avoid using your credit card for ATM withdrawals or quick cash. Most credit cards charge higher interest rates and sometimes an additional fee when you withdraw cash from your credit card. If you feel that you’ll be needing instant access to cash via your credit card, then my recommendation of getting a credit card through a credit union may be worth taking; credit union cards tend to harbor lower fees for cash advances.
Case in point: I have a Visa Card through my local credit union. With this card, I can transfer money from my credit card to my checking account with no fees or extra interest.
4. Pay your balances in full each month.
Be sure to pay your balance in full every month to avoid paying interest on the balance. This is where most people fall into debt and get in over their heads. Before using my credit card, I always make sure that I can pay for what I am charging. If you are allowing your balance to roll over every month and only paying the minimum, then using your credit card as a financial tool may not be for you.
5. Get your just rewards.
A lot of readers here are big fans of credit card rewards programs, as I am. And I find that it bears repeating: one of the best ways you can cash in on the benefits of credit cards is to get a card that offers rewards or travel miles. This is a bonus perk for using your card. On the same date each month, I have an American Express card that I use monthly to pay specific bills. I pay this card off in full. Each month, I receive points for those charges, which can be used for free gift cards and travel. I have received over $400 in gift cards just from doing this! The key here is to pay off your monthly balance in full if you own a rewards card. Otherwise, paying the interest on a card that has rewards will simply neutralize the fringe benefits you get out of using that type of card. You may be better off just owning a low interest rate credit card if you intend to keep a (growing) balance.
Credit cards offer many benefits when used properly. Not only do you receive great rewards, but you’ll also enjoy the ease of itemizing your expenses each month. I particularly like the record keeping benefits afforded by credit card companies as they’ve made it ten times easier for me to keep my business and personal accounting in check.
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{ 6 comments… read them below or add one }
I agree with this article. Credit cards have gotten a bad rap in the last few years with all the new legistation. However, if you use them properly, you can rack up a lot of good rewards or cash back. The key is to be disciplined about your usage.
I know friends who routinely use reward points to cover their entire family vacations.
That’s right. It’s all about how you use them. Another tip is to not use credit cards for perishable items like groceries, etc. unless you pay in full at the end of the month.
I agree that credit cards are not all bad – they have allowed me to do things I couldn’t have done otherwise, they just don’t play to most folks’ strengths.
I have seen some documentaries though that make me want to separate myself from credit card companies completely. Most recently there was a good PBS documentary on the credit card industry. Worth the time to watch it. Here’s the link.
Credit is a huge aspect of your personal finances. It is extremely important to learn to manage your credit. In order to do this you must have self discipline and will power. It is easy to see something you want to purchase and just swipe the card. Over-using credit cards is an easy way to get yourself in financial trouble. However you can get yourself out of debt, and you can make credit cards work for you rather than against you. You can visit our blog, and take a look at our selection of credit card offers.
I am new to this site and I wanted to post a comment about my experience with using debt settlement. I just completed a program with a debt settlement company and they saved me over 70% of my debts. Although I have seen my credit score suffer because of the program, it is nothing compared to the amount of stress that has been eased. I saved almost $37,000 over the last 2 years. I’d definitely recommend the debt settlement process to anyone who needs help.
I think that having a credit card makes you want to spend money you don’t have and thus, you are more than likely going to overspend (even if you are on a budget). So I prefer to use a debit card because you cannot spend more than what you have.