A credit card is the best money earning vehicle for some. At the same time, credit cards are number one reason for debt. The primary difference is knowing how to use credit cards to your advantage.
So far in my life I have earned thousands of dollars in cash back and rewards, while I never paid a single penny on credit card interest, fees or penalties. Apart from that I also follow another rule, I avoid store credit cards for their limited rewards and high interest rates.
Several things you should know before you get your first credit card. It is your passport to the world of credit.
The Credit Card Act of 2009 is one of the first things you should know when you get your card. Contained in the Act are all your rights as a credit card holder, and under what rules credit card companies have to play.
Doing Your Homework and Confirming Details
The second thing you need to know about your credit card will be all the benefits that come along with the card.
Advertisements and notices become confusing after a while with all the literature you need to understand when holding a credit card.
For example, you might need to ask customer support for minute details like foreign transaction fees or, if you can use your card for certain lump-sum purchase.
Notifying your card issuer promptly when you move or when you are travelling and may be late on a payment, call before it’s late. The companies want your business for your life, they are always willing to make alternate payment arrangements or waive fees.
The Concept of Minimum Payments
The idea of paying only minimum payments to your credit card means that you are trying to extend the life of your credit card debt as long as possible. If that is your wish or plan, then continue – however, if you believe that by paying only minimum payments to your card, you are reducing your expenses, go back to the drawing board and check your arithmetic please.
See how interest rates can pile up in minimum payments until you get to the very possible point where your minimum payments are only for the interest on the principal.
The Connection of Credit Scores and Credit Limits
Credit card companies are not worlds on their own, and neither should you even assume that credit card companies do not share information. It all comes out anyway in your credit score.
All card issuing companies are sensitive to bad debt and debtors – most credit card companies can sniff them a mile away.
All that sniffing does not matter if credit card companies were wrong, and that you can really pay off your credit card debt. For these companies, what is more important is averting a personal financial disaster, and perhaps dragging their credit balance along with it.
So the moment your credit score takes a turn for the worse, it is not unlikely that card issuers reduce your credit card maximum as soon as the information is confirmed.
Credit Cards Rewards
Rewards cards are my favorite. Knowing how to earn rewards is a skill that can make you a good credit card user. Virtually all credit card issuers offer rewards. To me, using a credit card which doesn’t pay rewards is foolishness.
Just don’t pick something that you aren’t likely to use. Also be wary of rewards that end up forcing you to spend more money
Earning rewards and using them are two different things. Be aware of your rewards points so that you can redeem when time comes, don’t let your points expire.
Payoff Full and On-Time
Pay off your total balance every month. Just paying the minimum due is a trap; If you try to pay off a $2,000 debt on an 18% APR card by just paying the minimum each month, it would take more than 15 years to repay the debt. And would cost you thousands of dollars more towards interest.
Always pay your credit card on time. A slip-up would result in late fee and other penalties — and could cause increased APR and negative credit bureau reporting.
Know The Benefit Programs
When you are in hardship, you lose jobs, your credit card companies can help you. Dial the customer service number and ask for relief program. You may get low APR or even, credit forgiveness.
Many card issuers also offer short term hardship program where interest rate can be reduced to as low as 0% when you are in short-term hardship due to job loss, reduced income or illness.
Always keep it in mind that credit cards are not free cash, if you purchase items on credit make sure you have money in your bank to pay for it in a month.
Readers, do you carry credit card debt or you pay off in-full every month?