Credit cards have been vilified by many as being the surest way of getting into irreversible debt. However, this notion and belief is not always true. It is possible to actually save money with credit cards. This is nevertheless only possible if you know how to go about saving money with credit cards. Here are a few time-tested ways in which you can still use your credit card and manage to put some cash into your pocket as well.
Rewards are a popular offer given by most credit card providers. They offer the card user certain rewards for using the card to purchase or make payments. These rewards come in the form of cash rebates, travel service discounts and so on. Making sure you use only reward cards means you will be getting at least some value back for the money spent. However, this is just one aspect to reward cards.
In addition to choosing only the credit cards that give rewards, you have to also be careful not to take up too many reward cards. The rationale behind this is that if the rewards are spread out over a number of cards, then you will not be able to maximize on these rewards. By taking out maybe one or two reward cards, you can consolidate all your purchases and in the process maximize any rewards you may be getting off the card.
This leads us to the next way you can save money with credit cards. Still on rewards, it is mostly the cards that offer rewards on luxury purchases that offer the highest rewards. To save more on rewards accrued, pick out credit cards that offer the largest rewards for day to day purchases. In addition, ensure that these rewards may be redeemed for your daily needs such as groceries, fuel and so on, rather than being redeemable for luxury goods that you may not necessarily need.
Most credit cards tend to have increasing interest rates. The credit card companies use an array of reasons and excuses to do this. To ensure you save money with your credit card, always try to maintain or lower your credit card interest rate. This is because most of the money lost through credit cards is due to runaway interest rates. Another reason to lower your interest rate is so as to maximize on rewards. With lower interest, the rewards you get become actual rewards rather than a smoke screen.
One of the ways you can lower your interest rates is through a debt swap. Due to the cumulative nature of interest owed, sometimes the amount payable and all the other charges can really get out of hand. Consider looking for a credit card that offers zero percent interest for a certain period of time, say one year, and transfer all your debt there. If you can pay back the full amount owed within this time, you will have saved a large sum of money which would have been payable on your old cards. It is worth noting, though, that once you get the new card, hold out from using it for the duration of the offer. This is because if you use it during this period, any money sent in will go towards settling the old debt while the new debt begins to accumulate and attract interest at the regular rate.
Another way through which you can save money with credit cards is by using the 50% rule. This rule states that you should not at any time exceed the 50% mark of your credit limit. This means that whenever you reach the 50% mark, you immediately switch to either another card or cash payments. Pay off this amount before resuming use of the card. This increases your credit rating and effectively entitles you to lower interest rates.
Paying all your balances on time may seem like the most obvious way to save money but it is not so for many credit card users. Making your credit card repayments on time denies the credit card company any opportunity to hike your interest rate and also obligates them to offer you lower interest rates on your cards. In addition, paying your balance on time gives you the flexibility to change cards in the event you either want to stop using your card or want to move to a new lower-interest credit card.
While determining to pay your balances on time, it is expedient to also realize that credit card companies have what they call a minimum amount due. This is usually calculated over a long period of time and may extend into years of repayment. This of course increases the amount of interest you will pay. To save money, always pay back as much as you can, over and above the minimum amount due to the bank. This way, you will pay the debt back within a shorter period and save money in the process.
Hidden charges in the fine print are another way money is lost in the hundreds of dollars. When applying for a credit card, always take time to read and analyze all the incidental costs that come with getting a credit card. These include late payment fees, credit transfer charges, and interest increment procedures and so on. By taking into account the full spectrum of charges, it is possible to determine what the real and full extent of the cost of a particular card is. With this information, picking the cheapest card becomes easier.
Finally, review, review, and review. For most credit card users, reviewing their credit card is something seldom done. It is inadequate to simply concentrate on making whatever payments come in the mail. Take time to sit with your financial adviser or someone knowledgeable in finance and review your credit cards every month. As you do this, you will catch interest rates that are creeping up, cancel some cards that have become redundant, transfer credit to cheaper or zero rated credit cards on offer, take up new higher-reward cards and so on. Ultimately, reviewing your cards is like going to the doctor for a regular check; prevention is better than cure.
Saving money with credit cards may seem the most tedious thing to do but so is everything else in life. Life is constantly happening around us and to us and so it may not always be easy or even possible to totally eliminate credit cards from our lives. However, by following the few guidelines above, it is at least possible to save money with credit cards and in the process increase the quality of our lives and get some much needed peace of mind.