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How to Use Your Credit Card Efficiently

How to Use Your Credit Card Efficiently

It can be almost as difficult to live with credit cards as to live without them. Credit card debt is a bigger problem with today’s consumers than ever before, without question. But this does not mean that these cannot be helpful tools when they are used properly. In what follows, we’ll tell you how to use your card most effectively.

  • Change your thinking. If you tend to see credit as free money that you can spend with reckless abandon, you need to change your thinking. Some cardholders see the option to buy now and pay later as the same thing as owing nothing. Remember that this is not a checking account. It’s actually the opposite of a bank account—instead of your money accruing interest, you have to pay interest with credit cards. The best way to see it is that it is not your money you’re spending; it is the lender’s. And, sooner or later, you will have to pay it back in spades.
  • Don’t charge things you can’t afford. Unless you have sufficient funds in your bank account to pay for the item at the moment you buy it, you probably shouldn’t be charging it in the first place. You can avoid a lot of credit heartache by simply not charging items to your card that you can’t afford. You may think you will eventually have the money, but there are no guarantees. You’re better off not taking the risk and just waiting until you actually have the money.
  • Pay your balance in full. By paying in full and on time, you can avoid costly interest charges and late fees and penalties. Consider this statistic: the average American household has $8,000 in debt. With minimum payments and average interest rates, that means the average family is spending $1400 per year on interest alone. So, after five years, you have paid the original amount of the debt solely in interest charges. Paying your full balance on time each month should not be a problem if you’re only charging things you are able to afford.
  • Maximize your rewards points. When you use these to pay for most of your monthly expenses and then pay the balance each month, you are in a position to collect a great deal of rewards points. So look for a card that offers rewards that coincide with your interests. For instance, you might pay a small annual fee to carry an airline rewards card with which you can earn free flights. Because you are not paying interest on your balance, the value of the free flights should far exceed the costs of carrying the card.
  • Take advantage of special offers. If you are carrying a revolving balance and you receive an offer from a creditor for a low-interest balance transfer, take advantage of the opportunity to pay down your debt at a next-to-nothing interest rate. Just make sure that you either pay the balance off or transfer the debt to another card before the introductory balance transfer interest rate expires.

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