There are people who will warn you against using credit cards (and for good reason) because of high interest rates and the potential for serious debt. While it is true that credit card debt is the most pernicious kind there is and is usually the first type of debt you should try to eliminate, ironically using a credit card can be a good way to save money so long as you pay the balance off each month. If you do not carry a balance, using your card can actually benefit you in a number of ways, giving you savings opportunities you wouldn’t otherwise have available to you when paying in cash.
Here are a few ways you can save money by using credit cards:
- Get a rewards card. Rewards cards often have higher interest rates than standard credit cards, but at the same time they offer you the chance to earn cash back for your purchases. If you use your rewards card responsibly and pay it off on time every month, you’re basically earning yourself free money to use as you see fit.
- Don’t take out more than one rewards card. While rewards cards have many benefits, the more of them you have the more you spread out your ability to earn points and cash-back. By having just one rewards card, all of your spending goes toward the same set of points, meaning you can accumulate your rewards much faster than if you used multiple cards.
- Pay your full balance every month. Or at least pay more than the minimum amount you owe. Carrying a high balance means a greater chance you’ll lose a lot in interest payments. The best way to ensure that you will not charge more than you can pay off each month is to have a spending plan and track the plan so that you do not go over what you have to spend each month.
- Put high-price items on your card and pay them off. If you are buying plane tickets, for example, and know you have enough money to pay them off right away, put them on your card. This has the dual benefit of giving you a boost to your rewards and building the strength of your credit.
Get more tips on responsible credit use by contacting the team at Money Mastery today.