It’s no secret that credit cards can be dangerous, especially if you’re not careful. But the truth is that credit cards can also help you to reap some pretty significant benefits, particularly if you are responsible for them and use them properly. So here are seven pieces of advice about credit cards that will keep you safe and secure while allowing you to benefit from your credit card use.
Cash Back
When you open a credit card account, your issuer likely offers a sign-up bonus to entice you. These bonuses often come in the form of cashback on your purchases. For example, when you use a card that earns 2% cashback at restaurants, you’ll receive a certain percentage back from what you spend there—even if you only paid for part of your meal with that card.
Introductory Offer
Many credit cards will offer a discounted introductory rate for a limited period; for example, your card might give you 0% interest on purchases and balance transfers for 12 months. If you have a strong financial situation and you plan to pay off your balance within 12 months, these introductory offers can work out very well. However, making only a minimum payment on a credit card is like renting money instead of buying it – there’s no real benefit other than avoiding late fees.
0% APR Balance Transfer
This can help you pay off debt more quickly without racking up additional interest charges. For example, say you want to transfer a balance from a high-interest credit card to another credit card. If you can’t pay off your current balance in full every month, 0% APR offers an opportunity to clear that balance faster with less money coming out of your pocket. That’s powerful.
Rewards Program
An added bonus for carrying a credit card is that many cards have great rewards programs. If you use your card frequently and pay off your balance in full every month, then those rewards can add up to hundreds or even thousands of dollars per year. Many cards offer cash back, points on specific purchases, airline miles, gift cards, or other incentives for using their card.
Sign Up Bonus
Signing up for a credit card can be an appealing proposition. This is true, especially if you’re just starting out, particularly if you qualify for a sign-up bonus or introductory APR offer. But sometimes, signing up for multiple cards in short order can indicate that you’re taking on too much debt and spending more than you can afford to pay back.
No Annual Fee
It might seem counterintuitive, but some credit cards charge an annual fee. That’s right – they take money out of your pocket annually just for having a card! Be sure to check whether or not your credit card charges a fee; if it does, look at comparable cards to find one that doesn’t. It’s not worth paying an annual fee when you could be receiving rewards or cashback on another card instead.
Card Sharing & Co-Branding
According to experts at SoFi Invest, “Card sharing and co-branding are two techniques you can use to increase your credit card acceptance.” Card sharing allows merchants to use a network like Elavon or Heartland Payment Systems to accept cards from multiple issuing banks. Each time a customer pays with a different card, that merchant gets paid by one bank and then collects from another later on. Co-branding is when issuers allow other companies to feature their brand on customer credit cards.
Use credit cards responsibly, and a credit card can be an excellent tool for managing your money. Be aware that interest charges can be very high if you carry a balance, so always try to pay your bill in full and on time every month.
