Credit cards have a bad rap. After all, credit card debt is on the rise, increasing by over 15 percent year-over-year in Q4 of 2022, according to Financer. So, I will begin by saying that if you are currently struggling with credit card debt, save this post for when your credit card debt is in the rearview mirror.
If you have little to no credit card debt – let’s talk about how you can use those cards wisely and save some moolah, particularly if you are looking to add a new card to the mix.
Choose the best sign-up offer
Whether it’s in points, cash back, or travel miles, virtually every card offers some sort of sign-up bonus. Typically, sign-up bonuses only kick in if you spend a certain amount within a set timeframe, like $4,000 in the first three months, or something along those lines. The bigger the bonus offer, the bigger the spending requirement, so this is one aspect to consider when signing up for a new card.
If what you usually spend falls below the threshold to receive one of these bonuses, consider waiting to apply for a new card until you need to spend more than usual, like when you purchase a new home appliance or book a vacation. This is a good way to take advantage of a bigger sign-up bonus than you would typically qualify for.
Look for credit cards with ongoing rewards, like points or miles, and select a card that offers benefits based on the way you spend. For example, if you travel a lot, especially if you use one airline or stay in a specific hotel chain most of the time, that airline or hotel chain probably has a credit card.
Outside of travel, some cards offer points in different categories, like food or gas, whereas others offer rewards in categories that you choose or in rotating categories. Others offer a flat reward across all categories. For example, the Bread Cashback American Express offers 2 percent on everything you spend. And there is no annual fee!
The cards with more generous rewards tend to require a strong credit score. These cards also often have an annual fee, but don’t let that annual fee deter you. By doing a quick calculation based on how much you usually spend and what the rewards are, it might be worth it. For example, I have an American Express Gold, which has a $250 annual fee. That seems high, right? BUT, the card had a generous signup bonus, I earn 4x cash back on food purchases, 1x on most other purchases, $10 in UBER cash every month, up to $120 in dining credits per year, 3x travel points when I book through Amex travel and more. You can check it out here and earn 90,000 membership rewards if you spend $4,000 in the first 6 months and up to $200 in statement credits for the first 3 months! I’ll receive 30,000 membership rewards – thanks! 😊
Look for added benefits
In addition to cashback, points, or miles, some cards have other benefits, like purchase protection, no foreign transaction fees, and discounts on things like magazine subscriptions or streaming services. I just saved a bunch on a streaming bundle just for signing up and paying with one of my credit cards. Credit card carriers also frequently offer exclusive savings on travel and shopping, so pay attention to those emails they send out!
One nice benefit that some cards offer is the ability to transfer balances for 0 percent or a very low percentage. This is a healthy way to move your debt and create some breathing room for yourself. Make sure to read the fine print for any fees associated with transferring balances and create a plan to pay off the balance before the interest rate returns to normal, which could occur in a few months or, say, 18 months.
Avoid unnecessary fees
Read the fine print of your credit card agreement to familiarize yourself with how the interest rate of your card can change over time. Also look at fees, such as annual fees, late fees, foreign transaction fees, and balance transfer fees.
Pay attention to your bill
Now that many of us are receiving our credit card bills via email – rather than snail mail – and paying via autopay, it’s easy to ignore the monthly bill. It’s vital to peruse your bill – print or digital – every month to look for subscriptions you are no longer using or incorrect charges.
Some credit cards even offer price adjustments, which means that if you purchase an item and find a lower price (usually within 30-60 days, depending on the credit card) you can file a claim with your credit card carrier for the difference. So, it’s worth looking at your bill every month!
Remember to pay in full
In closing, it’s important to mention that the tips above aren’t worth much if you carry a balance from month to month, so try to use your card with the expectation that you’ll be paying each bill in full.
If you need to use your credit card to make a large purchase, see if your card offers a version of Buy Now Pay Later, where you can spread out your payments. There can be a small fee or interest for doing this, but it should be less than the interest you would accrue if you simply carried the balance from month to month.