How to Get the Most Out of Your Credit Card
In a 2020 Bankrate survey, 59% of U.S. adults reported carrying a credit card yet 31% did not redeem their rewards. Whether you already have a credit card or are shopping around for your first one, getting the most out of your credit card is essential.
Instead of missing opportunities to save money on the things you love and care about, here are a few things you can do to ensure you always take full advantage of your credit card.
Be Selective When Choosing a Credit Card
Choosing a credit card might seem like an easy decision, but it’s important to remain selective. There’s a huge selection of credit cards to choose from, and each one differs from the next. Never accept the first offer you receive.
First, review the APR carefully. It is the interest rate you’ll pay on your credit card balance. Similar to loans and mortgages, the higher the interest rate, the more you pay for the privilege to borrow. There are several ways to ensure you get the best rate possible.
- Know your credit score
- Pay down or pay off old debt
- Increase your income
- Shop around for the lowest APR
Review the Fine Print
Even if you remain selective to find the best APR, reading the fine print is wise. Reading the terms and conditions and any fee schedules is not the most exciting thing, but it’s important to set your expectations and make an informed decision. It’s common for credit cards to have additional fees listed in the terms, and you need to know what they are and when they might apply.
- Late fees
- Returned payment fees
- Over-limit fees
- Balance transfer fees
- Cash advance fees
- Foreign transaction fees
These are just a few of the fees you might expect, but fees are only part of what you need to know to get the most out of the credit card you choose. Knowing the terms and conditions of the card and its rewards program is essential if you hope to maximize your rewards. Look for the rewards program rules in the fine print and read them. The more you know about the program, the less likely you’ll miss rewards opportunities when you use your card.
Earn Your Welcome Bonus
Many credit cards come with a welcome bonus. However, some welcome bonuses are limited-time offers, so if you sign up for a card without the bonus and it later offers one, contact the bank. There’s a good chance you can claim the welcome bonus if you didn’t receive one when you initially signed up for your card.
Another concern is earning the welcome bonus. Not every welcome or signup bonus is automatic. Sometimes the bonus comes with strings attached. Citi Premier card, for example, offers 60,000 bonus points as a welcome to new card recipients, but you only get the bonus if you spend $4,000 in qualifying credit card purchases during the first three months of credit card membership.
It shouldn’t be hard to earn a reward; your business is valuable. Extraco Banks offers several rewards cards with welcome bonuses that are less stringent, paving an easier path to getting your bonus. Visit our website to learn more.
Choose a Rewards Card That Matches Your Lifestyle
What’s the point in getting a credit card that rewards you with miles if you never travel? There isn’t one. To get the most bang for your buck, choose a rewards card that matches your lifestyle. If you travel often, a miles card makes sense. However, if you prefer shopping to travel, you might want to opt for a points or cash back card instead.
Consider your lifestyle choices and preferences to determine which rewards card makes the most sense for you. It’s all about personalization.
Pay On Time, Every Time
There is still bad advice passed around, and it’s time to clear that up. It’s unnecessary to always carry a balance on your credit card each month to build your credit. In fact, there are financial dangers in making only the minimum payment each month. It can cost you a lot of interest, and, according to Experian, it can also negatively impact your credit score.
The best way to protect your credit score and finances is to pay your balance in full each month. If you’re carrying a large balance and cannot do that, then pay more than the minimum until you can pay off the balance. If your balance is $1,000, for example, and your minimum payment is $100, aim for $150.
Late fees add up fast and compound the interest you pay when added to the principal balance. Another problem with late payments is increasing APRs. If you’re more than 60 days late making a payment, your credit card issuer might increase your interest rate, costing you more money. Avoid late fees and other penalties by making your credit card payment on time, every time.
Stay Below Your Credit Limit
Many credit cards have over-limit penalties you’ll pay should your balance exceed your credit limit. Another problem is using too much of your credit limit, negatively impacting your credit score. One way to avoid both issues is to always stay below your credit limit.
How much credit you use matters, especially if you later need a loan for a car, house, or another major purchase. You can manage your credit use best by not using more than 30% of your credit limit. If your credit card has a $1,000 limit, keep your credit use to around $300.
Life is full of little emergencies. That’s why it’s best to plan for them and have an emergency fund instead of relying on your credit card. When you must use your card, use it wisely and consider these tips to maximize your rewards. Not only will you save some of your hard-earned cash, but you’ll gain something extra as a bonus, whether that’s miles, points, or cash back.
Choose a rewards card that makes sense for you, and use your card wisely with the tips mentioned above to keep your financial health strong.