For some people, the credit card is the most accepted form of currency, but for others, it’s the best way to enter a vicious cycle of debt. Credit cards do put you in a vulnerable position to spend money you don’t already have, hence incurring credit card debt. But when used wisely and with care, credit cards can also put you ahead of your personal finance game.
Credit cards aren’t necessarily evil, but our money habits can be. If you’re looking to save money while using credit cards, here are the best tips you should follow:
1. Pick a credit card that offers rewards and cash back.
Using cash as currency doesn’t provide rewards and cash back, but credit cards do. If you choose the right card and develop sound and healthy usage habits, you’ll find your points piling up without even noticing.
What’s terrific about credit cards that offer cash backs and rewards is that you get something in return for using them. You could redeem the points as cash to pay a portion of the bill, or even enjoy perks such as free flights and accommodation upgrades.
2. Monitor your credit report regularly.
When you learn how to read your credit card processing statement, you also learn what factors impact your credit score. Whether you have a high credit utilization rate, open too many new accounts in a short period, or pay your bills late, it is important to realize that these things affect your credit card interest rate. The higher your interest, the more you have to pay.
You can bring down your interest and improve your credit score, and consequently save money by knowing what goes into your credit report.
3. Pay your credit card bill in full and on time.
If you believe you can pay the credit card debt in full before the due date rolls around, then by all means use your credit card. However, if you’re going to struggle scraping for money close to the deadline, then might as well save up until you can afford the purchase. Paying late and giving only the minimum due amount are two deadly combinations that get you into nasty credit card debt in no time. Save yourself from late charges and other penalties by charging only what you can afford and making sure to meet your due date for payment.
4. Take advantage of the 0% APR.
Whether you’re making a huge purchase or wish to transfer your balance to another credit card, take advantage of the 0% APR or annual percentage rate. Most credit issuers offer 0% APR as an introductory offer, running for around six to eighteen months. With this feature, you can make purchases using the credit card and not incur any interests at all within the indicated time frame. It would be the perfect time to make massive purchases such as booking a vacation or buying furniture.
And as for balance transfers, you can transfer credit card debt to a new one with a 0% interest. Aim to repay your credit card debt within the introductory period to avoid interest from piling up.
5. Limit the number of credit cards you own.
Owning too many credit cards puts you in a sensitive position to overspend. You could end up abusing your credit, and before you know it, you’ll have hefty bills to pay and multiple due dates to deal with. To keep your credit cards within a reasonable number, don’t open a new account unless you really need it. Also, space your applications within several months to prevent a dip on your credit score.
Limiting your credit card also doesn’t mean closing your accounts, as this can also negatively impact your credit rating. Instead, keep the credit card out of sight, but keep the account open. Bring one or two cards that you use the most, and bring those which have the most rewards or cash backs.
A credit card can be a very powerful tool as it gives you a sense of purchasing power. However, when you don’t use it wisely, you could end up in an endless cycle of debt that’s tough to get out of.
Using your credit card correctly, on the other hand, can save you money. You just need to be more cautious of your spending habits and keep up with your credit report to make sure you’re right on track. You should take control of your credit card, not the other way around.