Credit card companies offer a number of benefits to those users, and those benefits are increasing in both quantity and quality with each passing day. As the number of credit card holders continues to decline, the industry finds itself needing to revamp its image as well as its offerings.
A recent Gallup poll found that of the 71 percent of Americans who own credit cards, 64 percent pay off their monthly balances at least most of the time. This is a five percent increase from just six years earlier and a 12 percent increase from the 2004 poll. While this is a great indicator that Americans are getting smarter about their credit card purchases, there is still more that can be done.
1. Pay The Full Balance Every Month
The Gallup poll indicates that less than half of credit card owners pay off their balances each month while another 16 percent usually pay off their credit cards. That usually is a big problem. The average APR on a credit card is 14.9 percent. If a user leaves a balance of $500 on a credit card for just one month, he or she will need to pay an additional $74.50 when the next payment cycle rolls around. Even the interest owed on a $100 balance could pay for a meal out and a cup of coffee.
2. Setup Auto Payments
Credit cards allow their users to pay online. Most, if not all, allow their users to setup auto payments that automatically deduct from a savings or checking account. Users can select to pay the minimum payment due, a set monthly sum, or the entire balance. Scheduling an auto payment safeguards those who may forget a payment date, which then leads to additional fees and interest.
3. Spend Minimally
It should go without saying that credit card users should not outspend what they can afford. Credit cards will set high limits, and in a few rare instances, no limits, but this should be viewed as a safeguard, not as a challenge. Like an all-you-can-eat buffet, a high limit credit card does not mean the user needs to overextend their spending. A good rule of thumb is to treat the credit card like a debit card, only spending what can be paid off in total by the end of the month.
4. Look For The Best Rewards
Some credit card companies offer outstanding rewards to their users. These often come in the form of cash back on purchases or points that are earned for gift cards or other perks. Even within the same company, different credit cards can have varying rewards programs. Likewise, some change their incentives annually, quarterly, or even monthly. While one credit card may offer five percent back on supermarket purchases, another may offer six percent on trips to the gas station. It may be worthwhile for some users to keep multiple credit cards, reserving each for the one that gives them the biggest bonuses. Naturally, this only works if the user can ensure all cards are paid every month.
5. Utilize Discounts With Discretion
Many credit cards include a special offers page for all users. The page lists a variety of retailers, letting the user know that they will earn discounts or increased points by clicking through this portal and then using the specific card for purchases. This can be a great feature unless the user intends to apply a discount code to the purchase. Often, any savings or earned rewards are negated with the utilization of a discount code. Likewise, codes for 20 percent off or free shipping are often worth far more than what a credit card’s portal can provide.
6. Search For Hidden Fees
The wisest card holders never allow their balances to carry over from month-to-month. However, if that does happen, some people will pay dearly. There are cards that charge an additional fee along with interest if a balance is left on the card. Other common fees include balance transfer, cash advance, foreign transaction fee, closure fee, and even an inactivity fee. In addition, some small businesses may issue a surcharge to cover their expenses for those who use credit cards. Though this is not legal in all states, many states allow retailers to provide discounts to customers who pay with cash.
7. Monitor Credit Ratings
A credit card user is only as valuable as his or her credit rating, or so believe the credit card companies. Knowing one’s own credit score is vital when seeking loans or rate increases. Keeping a close eye on credit ratings also allows a card holder to be immediately aware of any fraudulent activity.
8. Renegotiate Terms
Holding a credit card does not mean that one must settle for the same APR and rewards program for a lifetime. Card holders can and should attempt to renegotiate terms as often as they like. This is especially true of those who improve their credit score.
9. Shun Department Store Credit Cards
Department store offer excellent discounts to first-time card holders. They often offer a large percentage off of an initial purchase along with regular coupons for card holders. However, they also have much higher APRs, which means that if a user does manage to carry over a balance, he or she will be paying roughly double the amount of interest of a standard issue card. Likewise, store credit cards tend to have low limits. If a user charges close to the max, he or she could easily see their credit score drop in one shopping trip.
10. Scrutinize All Transactions
One of the most important aspects to wisely holding a credit card is safeguarding its usage. Too many people trustingly look at the lump sum due before making a payment in one fell swoop. They might miss small, seemingly innocuous charges that could later lead to big problems. Professional credit card fraudsters will start their usage of a card in this way. They may order small items online, like socks or batteries. If this charge is not caught, they will move on to bigger and better things until a card holder’s credit line is maxed out and the authorities have to get involved. Even without fraudulent activity, closely observing one’s own credit card can help them find any accidental double charges or simply better understand their own spending habits.