There are a ridiculous amount of credit cards being offered today. You can earn anything from free coffee to free airline tickets just by spending on your plastic. Credit cards can be a great way to leverage your money and earn some nice rewards. They can also be abused and get people into serious problems with debt. But here are few quick tips I have about how to not only choose the right credit card for you, but also get the most out of it.
Get a card with rewards
Credit card companies want you to spend big money on their cards and many will reward you if you do. If you are a Starbucks fan, then get a card that gets you free coffee at Starbucks as your reward. If you are a Disney fan, then get a credit card that gives rewards at Disney parks and stores. My wife and I love to travel so we have a card that gives us miles on our favorite airline. In the last 4 years, we have accrued enough airline miles to fly us both to New York, Hawaii, and Orlando for different vacations. We do pay about $100 a year to have those credit cards (we each have a separate account to earn miles faster) but if you look at the fact that we have received 6 round trip tickets from California for about $400 total over those 4 years, we have definitely come out ahead.
Understand your interest rate
I have never carried a balance on my credit card. I pay it off every month in full. But I realize that is not a reality for many people who need to purchase things now and pay for them later. Unfortunately this develops an attitude that you never really have to pay for things as I have often heard people pay for things they know they can't afford by simply saying “I'll put it on my credit card!” But the reality is, if you buy something with your credit card you are actually going to probably pay about 20-30% more for that item if you don't pay it off right away due to the interest. Now if you have 0% interest card and plan on paying it off soon, that's a great way to go. But if you don't, please remember that they $100 pair of shoes you just bought on your credit card but can't afford, is really going to end up costing you closer to $150 if you take a couple of months to pay it off.
Have a credit card spending plan
what I mean by this is figure out what types of expenses you will and won't put on your credit card and stick to it. This will do two things for you. First, it will help you budget as you figure out what types of things on a month to month basis you can afford. Secondly, it will keep the amount of interest you pay down because you can expect what your bill will be at the end of every month. I cannot tell you how many times I have been with friends when they open up their credit card bill and say “I had no idea I spent that much this month!” In my opinion, that is scary. So hopefully some of these tips on how to get the most out of your credit card can help you not only save some money, but get that free coffee, hotel room, or vacation faster with your rewards.
