There’s a lot to consider when looking at different credit cards. While many consumers will look at how big a credit line they can get, many overlook the benefits credit cards provide. Travel miles, hotel points, and cash bonuses await those who apply for a credit card and use it wisely.
However, it’s important to note that these benefits don’t just fall into your lap once you own a credit card. You need to use your card the right way to maximize the rewards you get and put yourself in a position to enjoy them. Use the following tips to get what you want from your credit card, whether that’s fixing your credit score or taking a needed vacation. Did you ever wonder why your debit card declined but have money on it?
1. Start With a Credit Builder Card
The secret to getting the most out of your credit card is establishing the best credit score possible. With a good credit score, you can qualify for better rates, lower fees, and more exclusive rewards programs. If you need help getting started, kick things off with a credit builder card.
Credit builder cards typically have lower credit limits so new users don’t get carried away with careless spending. Most credit builder cards waive annual fees and focus more on helping users improve their credit score than earning points or higher spending limits.
Keep in mind that most of these cards are secured. This means the credit card company requires a deposit in order to open a line of credit. This stipulation helps individuals with poor or even nonexistent credit to get approved. While some companies don’t require a security deposit, this common requirement acts as a hedge against the risk of consumers with a problematic credit history.
2. Avoid Fees Whenever Possible
There are plenty of credit cards out there that come with annual fees. This isn’t always bad, as these cards usually offer top-of-the-line rewards. However, there are plenty of comparable cards without any fees that will give you more bang for your buck.
There are other credit card fees that you should avoid at all costs. Certain features such as balance transfers and cash advances might look good on paper but can come with hefty surcharges. Keep your finances in order so you won’t have to resort to these services and throw money down the drain.
3. Select Cards With Useful Benefits
Not all credit cards are created equal, and not all of them will fit your needs. Credit card rewards are advantageous, but only if you pick the right ones. Some programs and benefits will simply do you no good.
For example, let’s say you select a credit card with an airline miles program. If you’re afraid to fly or despise travel, this certainly isn’t the card for you. You’d be better off with a credit card that gives cash back on purchases like groceries and gas.
There is a chance that you would make an effort to fly more if reward points made it more affordable. Make sure that’s the case before opting for a credit card that offers those rewards. To make the most of your card use, you want rewards that apply to your specific needs and wants.
4. Spend Strategically
In most cases, you earn rewards according to how you spend. If you’re not using your credit card, you’re missing out on loyalty points and cash rewards that accumulate with transactions. These rewards are usually based on percentages, so the more you spend, the faster points stack up.
This doesn’t mean you should max out your credit card every chance you get. Rather, you should make a plan to use your credit card regularly and strategically. Your credit card can be designated for specific purchases such as food and gas, while your debit card covers the rest. You can also set up some recurring payments on your credit card, such as utilities or your Netflix subscription.
Another factor to keep in mind is your credit utilization ratio. This is the percentage of your available credit that you are currently using. It’s recommended that you keep your utilization rate below 30%. If your total credit limit is $10,000, then you would only want to use up to $3,000 at any given point. Exceeding that amount will prompt the major credit bureaus to lower your credit score.
5. Leverage Autopay and Protection Features
Always, always, always pay your credit card bills on time, preferably in full. Nothing will hurt your credit score more than late or missed payments. The average American consumer forks out $250 annually to cover overdrafts and late fees on their credit cards.
The easiest way to stay on top of credit card payments is to set up autopay. Once a month, your payment will be covered by whatever bank account you connect to your card. Make sure you always have enough in the account to cover at least the minimum payment, which will keep you out of hot water.
You’re also selling yourself short if you don’t take advantage of any protection features and programs your credit provider offers. Look at companies that provide zero-liability protection and fraud monitoring to keep your account secured. Some cards even have a mobile app with which you can instantly deactivate a card if it’s lost or stolen.
6. Use Your Rewards
What’s the point of racking up thousands of reward points if you’re never going to use them? If you really want to get the most out of your credit card, cash in your rewards whenever you can.
Remember, some rewards can expire if you let them sit for too long. Be sure to take note of any expiration dates on your rewards so you use them before they’re lost forever. You’ll be kicking yourself if you miss a summer vacation because your airline miles expired before you took advantage of them. Invest some time in downloading a reminders app if you think you might fall victim to this.
It’s amazing what a simple piece of plastic can do for you when used strategically. Grab your wallet and draft up a plan to maximize the value you get out of your credit card today. Your only regret will be not starting sooner.