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.
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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