Indeed, credit cards can be a helpful tool in helping you manage your finances. This can also help you have a better credit history. Depending on the kind of credit card that you get, it can offer you fraud and purchase protection features, unlike cash. As such, if your card is stolen or lost, it can be easily replaced by the banks.
So, what’s the best way to use credit cards? In this article, we will explore some ways on how to use credit cards to build credit. For example, you can pay down debts, earn rewards, and finance a purchase.
Earn Rewards
The use of credit cards is one way to earn rewards. This can help you earn back on the purchases you will be making anyway. Indeed, there are a variety of rewards cards that you can select. This includes travel, airline, hotel, and cashback cards. Determine the type of card that is suitable for you, then you have to determine the kind of rewards that you will want to have. Know your lifestyle and your spending habits too.
According to research, people who often pay their purchases with their credit cards tend to spend more versus those who pay it with cash. As such, if you try to use your credit card to earn some rewards, try to use your cards to pay for items that you normally buy and know that you can pay.
Moreover, some reward cards have an annual fee. If you did not earn enough rewards to offset the fee, it will be best to opt for another type of card.
Finance a Purchase
A card with 0% purchase APR can help you pay off big purchases interest-free. If you are confident, you can pay off the balance in full. One good option for you is, before the intro rate ends, use the credit cards to build credit and finance a purchase.
Keep a Low Balance
One factor that affects your FICO score is the amounts you owe. The higher your utilization, the more likely that you will miss payments and be overextended. As such, make sure that you keep your credit card balance relatively low so you can have a boost on your credit. Make sure to aim for 30% or even lower balance.
Pay Down Debt
Many credit cards when used strategically can help you pay off the debt. Some cards offer balance transfers with low or no interest. If you transfer high-interest debt and pay it off, you can save some money on the interest charges.
Treat it like a Debit Card
Keep a budget so you will know how much you have to spend. Treat your credit card as a debit card, spend only what you know you will be able to pay in full whenever the bill comes. The more focused you are on spending within your budget, the easier it will be to avoid paying high interest and carrying a balance.
P.s. if you’re in the market for a credit card, there is no reason why you shouldn’t get an extra bonus for signing up. For example, Slickdeals.net has a really nice review of the Chase Freedom’s Unlimited card. I’d give it a read if you’re looking for a new card.
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