In today’s society, using a credit card has become an integral part of our financial landscape. When used wisely, they can offer a plethora of benefits, from convenience to cashback rewards and even travel perks. However, many individuals find themselves overwhelmed or trapped in debt due to mismanagement of their credit cards.  I’m used to being the person that has tons of credit cards; like over ten credit cards at one time.  In the beginning, I felt like I had a lot of credit that I can utilize. 

Also, there are tons of credit cards out there that offer tons of perks by signing up. Like giving you an extra 30,000 points toward your use if you spent more than $3,000.00 within the 3 months of applying.  Does that sound familiar to you?  In the beginning it sounds amazing, but if you are not careful and use your credit card irresponsibly, then you will end up like me with a lot of credit card debts.  It took me a long long time to get them to pay off.  Over 10 years for sure!  Therefore, I would like to write this post to talk about how you can use the credit cards to your advantage while avoiding common pitfalls.

The Fundamentals of Credit Card Shakespeare Guide To Using Credit Card

1. Always Pay Your Balance in Full Every Month

The most basic skill you need to acquire is how to use a credit card. It is an essential component to being fiscally healthy. The golden rule is to pay the full balance off every month. This allows you to avoid the interest costs, which can snowball before you know it and dig a hole that feels impossible to climb out. Paying your balance in full helps you avoid extra costs incurred by interest as well as results in a healthy credit score because it shows financial institutions that you can be responsible with your credit.

Budgeting your base monthly expenses (savings, bills…) is key to success. Rule of Thumb; use credit cards like your debit card, spend only what you have in the Bank.

2. Utilize 0% APR Cards

You can also try with 0% APR (Annual Percentage Rate) credit cards. With careful usage, these cards could be highly useful. They provide an interest-free period on purchases or balance transfers. This can be a good method for controlling big expenses or combining debt with no added interest. But, make sure to read the fine print and, if not, just be prepared to pay off the balance by the time your introductory period expires because there can be some pretty high interest rates that kicks in.

3. Keep Debt on Credit Card you don’t use Regularly

In many cases, it actually helps if you keep some debt on a card that you don’t rely on regularly.

If you regularly carry a balance on your cards, think about using one (or maybe two at most) for all of your daily spending and the other(s) ONLY to stay out of debt. Staying organized with your finances will make it easier to follow a budget and avoid those pesky impulse purchases that pile on the debt.

Another approach can be to carry debt on a card you do not use frequently. This will only help you control your finances a little better, if at all; truly divide and conquer when it comes to paying down debt, try setting aside a specific card for carrying the balance. This way you have your other cards to use as normal and it makes it easier to follow how much of that debt has actually been paid off. It also keeps you from using your original card and going further into debt.

4. Monitor Your Activity Closely

You should always keep an eye on your credit card activity for unauthorized transactions — being proactive about any type of fraud is the key. Many credit card issuers also have tools to let you know when something does not seem right. This can provide an extra layer of protection. Keep track of your credit by setting up alerts for high dollar transactions and any activity that may feel suspicious or a sign of fraud. So as a responsible account holder, you must be vigilant about your ledger and clear the different ends in order to secure yourself from becoming a prey of terrible things like fraud. You can also keep an eye on your pulse on how much spending and you do not even abuse the use of your credit cards.

5. Use reward cards

Deciding Which Card Is Right for You When it comes to choosing the right credit card for your needs, the first step is understanding the types available. The main categories of credit cards are generally rewards cards, cash back cards, travel cards and balance transfer cards.

All types have different privileges which are designed according to a purpose determined by the varying financial goals and lifestyles. Select a loyalty program that gels well with your expenses and to ensure that you reap maximum rewards out of cards. There will likely be terms and conditions for the rewards program that explain any expiration dates or limits on how to redeem.

Some of the best rewards cards are meant to give 2 points or miles for every dollar spent. The reward cards should be availed to the full for this purpose. If you redeem for cash back to cover your credit card bill, it typically won’t be the best deal.  Instead, look into what the card offers. Many times the conversion rate is better with travel and merchandise redemptions — especially using the reward card. A rewards card may have great value if you are a regular shopper, enjoy dining out or do a lot of traveling. Find cards that reward how you spend to get the most out of your benefits.

Cash Back Cards

Cash back cards are the most straightforward, offering a percentage of your spending back as cash. They are particularly beneficial for those who prefer a simple return on their purchases. Especially if you don’t want to spend too much time comparing the cash back vs. other exchange options.  Evaluate the cash back rates, as some cards offer higher percentages in specific categories like groceries or gas.

Travel Cards

Typically, travel cards come with rewards points or miles you can then spend on flight tickets, hotels, etc. In addition, these cards frequently have bonus perks like free travel insurance, lounge access, and no foreign transaction fees. These are the cards that frequent travelers need to take on their money adventures.

Balance Transfer Cards

Balance transfer cards have low or 0% rates which last for an introductory period and after the term, a higher regular APR is applied to new balances. A good option if you are trying to roll your debt together to pay a lower interest rate. Make sure you know how long the introductory period is and what kind of fees are involved in balance transfers.

Compare credit cards on features like fees, interest rates and rewards If you do not take full advantage of the card’s features, the annual fees can sometimes exceed the benefits. The interest rates are some of the most important, especially if you expect to carry a balance. And rewards programs should be examined for the degrees of flexibility and limitation on redemptions.

Another good means of saving are by maxing out sign-up bonuses. A lot of cards have a reward or cash back program where if you spend X amount within the first few months, you will get Y reward. You should optimize your spending this way, but don’t end up incurring expenses just to over a threshold just to avail the bonus.

Lastly, read completely through all of the terms and conditions with any credit card. Reading the terms and conditions can provide you with clarity on potential hidden charges, thus helping you maximize your new card to its full potential without incurring any unnecessary cost.

6. Keeping Your Credit Card Usage Under Control

However, in order to keep long term financial health at bay, one must be careful with credit cards. The most important thing is to simply check your credit card and credit report regularly. By scrutinizing these papers every month, you will catch anything that does not belong to your documents by preventing unauthorized charges or errors that may have a negative impact on your credit rating. Also, doing an annual checking of your credit report keeps your credit history accurate and updated which is necessary for keeping a healthy score.

Steering clear of these common pitfalls, which includes overusing and having a high balance, is key to managing credit cards effectively. So, make sure you avoid the pits of maxing out credit cards and living beyond your means. Keep your credit utilization ratio (what percent of your credit limit you are using) less than 30% The ratio is one of most important variables that determines a credit score and its best kept low for optimum financial health.

Your Credit Cards Need Strategy to Get the Most Out of Them For example, enable payment reminders or use online banking to make sure you always pay on time. After this date, there will be a fee for late payments & it also negatively impacts your credit! Furthermore, knowing the fine print of your credit cards can make you aware of untimely changes that could ruin things for you. Always check for changes to interest rates, fees and reward programs as they are announced by your card issuer.

7. Strategize on balance transfer offers

Use balance transfer offers if you already have high-interest credit card debt Most credit card offers include promotional deals that may offer balance transfers from higher-interest cards to a new card with lower or 0% APR over a specific time period. Put your debt onto one card with a low or no interest rate so you can save on all the money trapped in those high interest rates and pay off your debt faster.

8. Maximize Sign-Up Bonuses

Seek out new credit card offers that come with high-value bonuses to entice you as a noob. This is usually in the form of cash back or travel miles, the statement credits you after a certain minimum spending requirement (like $2000) has been met within the first 3 months of opening an account. You can leverage these rewards into lucrative bonuses to amplify the financial benefits of using credit cards even more, simply by being strategic about when and how you apply and spend.

9. Utilize Perks and Benefits

Credit card perks and benefits: Rewards points or cashback are not the only thing you get with most credit cards. Some of the benefits you might see include insurance for travel or rental cars, an extended warranty, purchase protection or a free airport lounge membership/access to exclusive events. Spend time getting to know the benefits of your credit cards and using them as much as you can in order to increase how much value you get out of your cards.

Conclusion

When used correctly, credit cards can be a great financial resource. Take them up on 0% APR offers, always pay your balance in full each month, use as needed but keep an eye on activity and choose the best card for what you need it for. Through careful planning and some fortitude you can unlock the credit cards potential for utilizing them as a beneficial tool, helping to build your financial future.