How to Use Credit Cards to Your Advantage

To this day, I still wonder why some people, even financial experts, do not take advantage of the benefits that credit cards offer.  I have read many articles that suggest paying cash for your daily expenses (or some experts even suggesting paying cash for everything) and to avoid credit cards no matter what.  I strongly disagree.  Credit cards, when used correctly can save the average person at least $400 dollars per year.  I primarily use two rewards credit cards throughout the year, and I just cashed in my yearly amount of rewards.  I accumulated $350 from one credit card and $50 from the other one (that I don’t use as often).  You can do the same thing – here’s how…

Several credit cards (with no annual fee) offer rewards.  Some offer rewards that accumulate points as you spend money that can be traded in for cash, gifts, airplane tickets, etc. while others accumulate cold hard cash.  The basic idea is that with every dollar that you spend, the credit card company will pay you a percentage back on each expense.  This is great news.  You can think of this reward in a variety of ways—some of which are counterproductive, so you have to be careful.  One example of this destructive mindset is if you are constantly thinking of the reward money that you are going to get back when you are shopping, you are more likely to spend more money.  This doesn’t save you money.  However, if you decide to withdraw whatever rewards you have accumulated over a year’s length of time, you will be more likely not have rewards on your mind and not try to spend more money as a result.  This results in money that you would have otherwise if you purchased the same items in cash (at the same price).  If you are more disciplined in buying only what you need, you do not even have to set up this system of cashing in your rewards once a year to keep you from thinking about the rewards.  Merely asking yourself whether you absolutely NEED this item may be enough.

The other big thing to consider is whether you will pay off your credit card balance each month.  If you don’t pay off your balance, you will be stuck with late payment fees and also paying interest on the unpaid balance.  In order to reap the benefits of earning money through the rewards, you have to be disciplined to paying off your balance each month.  This is one of the biggest lessons that young people learn when first starting to pay their own bills.  I know of several people who were not intentional about paying off their credit card bills each month and were be forced to pay so much more in fees and interest.  Don’t let this be you!

The next step is to find the best credit cards that match your spending habits.  If you are interested in reading about which Rewards Credit Cards I use, you can read my other article about the best rewards credit cards.



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