Posts contain affiliate links, see disclosure for more details.
If you look up advice about credit cards online, most of it is about how you should be wary of using them. Many advice columns detail how credit cards can land you in debt and how you may have to pay hundreds of dollars in interests and fees.
While this is definitely true, it’s not the entire truth. The fact of the matter is that all of it depends on how you use your credit card. It’s definitely very easy to rack up debt if you use your credit card recklessly but if you use it responsibly and do your research, you can build your credit and save money.
1. Be Wary of Debt Collectors
Debt collection agencies such as PDCS may contact you if you have a credit card. You may be asking yourself, “What is PDCS?” PDCS is one of many debt collection agencies that collect other agencies’ debts. Most of the time, their claims are legit but there can be times where you may be the target of a scam by someone claiming to be representing a debt collection agency. Be sure to do your research in order to confirm whether the debt they claim you owe them is even real or not.
2. Reduce your Interest Rate by Transferring Balances
Here’s a scenario that may be all too familiar to you: You’re carrying a balance on a credit that has a very high interest rate. While this is a tough spot to be in, it’s actually quite easy to get out of. All you have to do is transfer your balance to a credit card that has a lower interest rate. This will help save you hundreds of dollars in the long run.
3. Use a Cash Back Credit Card
Cash-back credit cards are ones that allow you to accumulate cash rewards on your credit card. You can max out your cash earnings by paying for everything using your credit card, not just the purchases that earn you the highest cash rewards. Using a cash-back credit card for everything is a great way to earn money efficiently. For example, suppose you spend about $3000 a month using your credit card on bills and other miscellaneous expenses, you’ll be able to earn up to $360 a year on a credit card that only pays 1% in rewards.
4. Redeem Gift Cards with Your Cash
While cash is an attractive and versatile reward, in order to fully maximize the potential of your credit card, you can redeem the cash for gift cards. These gift cards are associated with your credit card’s rewards partners and oftentimes, you can get a higher value gift card compared to the cash you redeem it for. For example, there’s a chance you might be able to redeem $45 cash rewards in exchange for a gift card that is worth $50.
5. Skip Car Rental Insurance
Using a car rental agency’s coverage is a bad idea in general as it can increase the price of your car rental by up to $20 each day. You will find that most major credit cards offer car rental insurance as long as you reject the insurance offered by the car rental company and also pay for the car rental itself with your credit card.
6. Look for a Credit Card that has a Sign-Up Bonus
A majority of credit cards offer a sign-up bonus that you can take advantage of. These bonuses can be cash-back rewards, free hotel stays, discounts at certain retailers, etc. Many credit cards also come with spending bonuses. In order to be eligible for these bonuses, you have to spend a certain amount of money within the first few months of having your credit card.
7. Find a Credit Card with No Foreign Transaction Fees
You will find that a lot of credit cards charge a foreign transaction fee every time you make a purchase in a different currency. Usually, this fee is about 2 – 3% of your purchase. If you travel a lot or if you buy a lot of products that come from other countries, then these fees can rack up and cost you a lot of money. There do exist credit cards that have no foreign transaction fees. So, if you’re a person that spends a lot of money internationally then you may want to get a credit card that has no foreign transaction fee.
8. Avoid Carrying a Balance
This goes without saying but all of what we’ve discussed so far will be pointless if you carry a balance on your credit card. Make sure that you pay your balance in full each month so that you can avoid paying interest or any late fees.
9. Consider Paying More than the Minimum
If you can afford it, you should definitely consider paying more than the minimum amount required of you each month. It will help you avoid paying interest in the long run and there are certain credit cards that even reward such good practices.
10. Avoid Using Your Credit Card in Emergencies if you can
Emergencies are tough which is why it’s a good idea to save up and have an emergency fund right now. This will help you avoid relying on your credit card when the need arises. If you use your credit card during an emergency, there’s a chance you may rack up a hefty balance which would mean you would have to pay extra as interest.
Managing credit cards can be tricky as is evident by the large number of people in the world that are currently in debt. However, with the right research, approach and mindset, you can definitely realize your credit card’s full potential and use it to not only save money but also earn money.