How to Handle Your Credit Cards, From Applying to Paying

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?

Comments

Jai Catalano says
March 28, 2012 at 8:44 AM

Here is how I handle it. I have 1 card and I spend what I have available to pay. I don’t have any CC debt because of it. The only debt I have are my 2 kids. Hopefully they will build a return for me in the future. 🙂

- Karunesh says
  March 29, 2012 at 1:50 AM
  
  I agree with Jai. Best would be to have just one card. Though I do not have any credit card 🙂
  
  - SB says
    March 29, 2012 at 2:48 PM
    
    Having a credit card is one way of improving your score.
    
- SB says
  March 29, 2012 at 2:49 PM
  
  nice way to see a debt Jai!
  
Daisy @ Add Vodka says
March 28, 2012 at 8:54 AM

When I got my credit card, I was 18 and I guess I lucked out because I didn’t even really research it, I just got the first card I saw. I love it, as I like the rebate rewards and it has no annual fee. Plus I always pay it off so I don’t incur interest.

Modest Money says
March 28, 2012 at 10:51 AM

I always pay my credit card balance in full each month. With the high interest being charged, it is horrible idea not to. At the very least I pay it off via my line of credit if money is tight. Also, good point about not going for rewards that you won’t use or will cost you more money to use. Getting airline miles may be great, but pretty useless if you cannot afford all of the other expenses involved with a vacation.

ImpulseSave says
March 28, 2012 at 12:00 PM

Thank you for the tips! I love my current credit card and always pay it off in full. I get great rewards and am building my credit for the future. I have recently started paying off the balance early, because I switched to paperless statements and didn’t want to risk missing a payment. Is there any reason I shouldn’t do this, to your knowledge? Could it affect my rewards?

krantcents says
March 28, 2012 at 3:17 PM

I use credit cards exclusiively. I use an airline card for most of my purchases. Costco and Target cards for the rest. I always pay my balance in full every month.

- SB says
  March 29, 2012 at 2:55 PM
  
  You are an expert Larry!
  
Marianne @ Preserving Pennies says
March 28, 2012 at 4:49 PM

We are in Canada and have a President’s Choice Mastercard that gets us points to use towards free groceries. I love my card and blogged about how we get the most out of it here: http://preservingpennies.com/how-we-save-money-by-using-our-credit/ Of course, we pay it off every month so we have not paid interest on it since getting out of debt a few years ago. I love free groceries and an interest free 30 day loan!!

MoneyCone says
March 28, 2012 at 5:03 PM

I don’t keep a balance, like you avoid store cards.

- SB says
  March 29, 2012 at 2:52 PM
  
  good strategy!
  
PB @ EconomicallyHumble.com says
March 28, 2012 at 8:14 PM

good suggestions… and no matter what, Always pay the entire card. If you can’t pay the entire card off then you are spending too much money.

- SB says
  March 29, 2012 at 2:53 PM
  
  or paying little attention to your spending
  
jefferson says
March 28, 2012 at 9:35 PM

i have carried a credit card balance for the majority of my adult life, i am sad to say.. it was never intentional, i just didn’t plan for emergencies– and when they came.. i had no way to pay for them..

we are finally on the right path now, i am proud to say.

- SB says
  March 29, 2012 at 2:54 PM
  
  Failures make us wiser, same happened to you
  
Mary @ Buy Sell Funds says
March 29, 2012 at 5:38 AM

Your explanation about the concept of minimum payments is highly significant. Some people tend to relax on their budget due to that payment scheme. Thanks for the guide.

- SB says
  March 29, 2012 at 2:47 PM
  
  Mary you got the best point out of this article. Keep paying off the balance and you’ll reap the rewards
  
Kevin Williams says
October 8, 2012 at 5:20 PM

Great post! I think a lot of people need to pay attention to their rewards programs. If you are enticed by promotional rates and rewards; you have to make it a point to stay informed as to the terms and conditions for them and when they’ll expire.

Aaron says
June 6, 2016 at 4:27 AM

Hi, I came to this article in hopes of finding genuine advise about credit card usage, as I have just been approved for my first credit card. I am 19 years old, however, reasonably responsible (for someone my age). Can I have a basic run down on how to improve and stabilize my credit? Mistakes NOT to make and look out for? Anything would be appreciated! Thank you!