Ten Tips for Credit Card Holders
Credit cards can be a financial blessing or the cause of years of debt, depending on how they’re used. Reaping maximum benefits from a credit card requires awareness and understanding of various card terms and conditions. The following ten tips for credit cardholders should help anyone avoid some of the debt pitfalls often associated with irresponsible and misinformed credit card selection and usage.
1. Understand the Terms and Conditions
Most credit card companies will not advertise the negative aspects of their cards, which is why it is necessary to thoroughly examine the terms and conditions before applying for any card. Never apply for a card without first being sure about every sentence in the card contract. Even a small misunderstanding could lead to unnecessary fees and penalties, so don’t be afraid to ask questions if the terms and conditions are confusing.
2. Look for Long Introductory Periods
Many people choose credit cards based on the true interest rate rather than the length of the introductory period. If the plan is to transfer the balance of an existing card to pay it off with the new card, then a longer introductory period would be more beneficial than a lower long-term interest rate.
3. Avoid Carrying Card Balances
Most card holders make the poor decision of paying a percentage of their outstanding balance, letting the remainder carry over to the next month. While this is often the most convenient decision, it also causes more interest to accumulate, ultimately increasing the amount of total debt that must be repaid.
4. Pay More Than the Minimum
While it is best to carry none of the balance into the next month, many times it is not feasible for the card holder to repay the balance in full. If this is the case, at least try to pay more than the minimum due. Paying the minimum every month will not only increase the amount of debt owed, it will also have a negative impact on the credit score!
5. Choose Rewards Wisely
A lot of people choose rewards cards because they’re excited about the prospect of earning cash back, frequent flyer miles, gas discounts, and other rewards. When selecting a rewards card it is best to choose one that offers rewards that will be needed. For example, it would be quite senseless to apply for a gas rewards card without owning a vehicle.
6. Choose Cash Back Cards
As mentioned, choosing the right rewards program is very important, which is why for many people it’s best to opt for cash back rewards cards. These cards are usually governed by better terms and there is no complex point system with restrictions and expiration dates.
7. Choose Purchase Protection
Some credit cards offer purchase protection, while others offer extended warranties on purchases made with the card. Ideally, it is best to choose a card with purchase protection because it will cover the cost of the item if it is broken or stolen, whereas an extended warranty is only effective after the initial warranty has expired, which means it is often useless.
8. Learn to Utilize Multiple Credit Cards
Having more than one credit card may seem like a hassle, but in reality it has many benefits. Having a card for specific types of purchases can be beneficial, especially for business owners. For example, it would be best to purchase gas with a gas rewards cards, and business investments with a business credit card.
9. Monitor Credit and Expenses
It is also important to closely monitor the credit score and all outstanding balances. Try not to rely solely on the amount posted by the card company, as this can be inaccurate for a short period of time. Ideally it is best to use a combination of personal accounting software and credit monitoring services.
10. Be Careful When Closing Credit Accounts
A lot of people decide to close their credit accounts after clearing debt, for fear that the debt will return. However, it may be more beneficial to let the account sit rather than closing it, as it will decrease the total amount of credit available, often having a negative impact on the debt-to-credit ratio, which is a major determining factor for the credit score.