Credit cards can be highly beneficial to your finances if used correctly, but if used incorrectly, they will be of great detriment. Let’s discuss ways to get the most from your credit cards while avoiding common credit card traps.
How to get the most from your credit card (and avoid traps)
The first step when investing in a credit card is determining which credit card benefits are best for you. The most common credit card perks are cash rewards, miles rewards, and points. Depending on your lifestyle, one may be more beneficial to you than the other.
Cash rewards are usually the easiest to understand and the most straightforward to redeem. Credit card companies allow you to use cash rewards to pay off your credit card balance, make online purchases, have the money mailed to you or deposited into a checking account. Another coveted credit card perk is miles rewards. When your credit card offers miles rewards, you can redeem your miles for airline tickets or hotel stays. The number of miles you will receive will vary depending on your credit card and your benefits.
Credit card companies also offer programs that earn points for dollars spent on your credit card and other exclusive benefits. The points can be redeemed for merchandise, gift cards, cash, or travel. The unique thing about points is that you can earn additional points for meeting established program thresholds or spending money in particular places. Consumers may find it difficult to calculate credit card points and regrettably, it leads to consumers not taking the best advantage of earned rewards.
Comparison websites help to view the benefits offered by several different credit card companies in one place, making it easier to choose the credit card that best compliments your lifestyle.
Stay ahead of the game by using your credit cards responsibly, that way you can utilize the many benefits that come with access to credit. Should you fall behind or overspend, you will find that the benefits of credit are unaffordable… in more than one way! Interest and added fees make credit very expensive. Not to mention, the damage that missed payments and bankruptcy can cause to someone’s financial wellbeing.
Don’t be fooled by high credit limits on your cards. When you use more than 30% of your available credit limit, it temporarily impacts your credit score. If you have a credit limit of $5,000, consider spending no more than $1,500 – $1,800, in order to avoid credit impact. Rest assured, that as soon as you pay down your credit balance below 30% of the available limit, your credit score should positively reflect the improvement.
All that being said, if you’ve read this far, and you’re one of the millions of people who are overwhelmed by their credit card payments, consider hiring a reputable debt agency to help you strategize a plan for affordable debt repayment.