Credit cards are intimidating for a lot of people. In the light of the most recent recession, revolving lines of credit have become the villains in several American households. It seems like a good idea to deal in cash only and save away coin-by-coin until you have a holding like Scrooge McDuck. However, that is not becoming a reality anytime soon. The age of economic uncertainty ensures that the only way people can survive is by borrowing from tomorrow. There is a huge drawback to this prevalent lifestyle since no one out there exactly tells you how you will pay the outstanding tomorrow.
How does the middle-class couple in your neighborhood afford a 4-days-5-nights Paris tour? How did your colleague afford to buy a new sedan last summer? These are blessings of a small plastic card that has the power to buy the world. Credit cards can help you build your FICO score, and at the same time, they can earn you travel rewards. Cash backs and gifts are conventional norms of credit cards. Sadly, less than 50% of daily credit card users clear their bills every month. Americans are swimming in the most significant credit card debt of all times. Their total credit card debt has crossed $1 trillion the last year.
Credit cards are like firearms. If you do not have a safety catch on them, they can wreak havoc. If you know how to use them correctly, they can protect you and your riches. It is indeed possible to save money through the use of low-interest credit cards. The prudent use of the same can help you reduce your interest rate on your outstanding debts. Here are a few ways you can utilize the credit cards to your benefit –
- Consolidation of credit card debts
Many people own more than one credit card. They use all of them simultaneously for paying their utility bills and regular expenses. They often find it easier to transfer the outstanding of multiple credit cards onto one that offers 0% interest rate or an incredibly low APR. Zero-cost balance transfer seems too good to be true, and that is because it is! It is usually a limited period offer that exists for about six months to a year. Therefore, always analyze the cost-benefit ratio before you transfer your debt. You need to pay up the amount before the 0% interest cum APR period is over.
- Pay more than the minimum
Credit card payments can seem deceivingly easy when you consider just the minimum charges each month. Not paying in full or not paying on time can incur high-interest rates and penalties. Paying only the minimum charges per month will keep your card active, but soon you will reach your maximum expense threshold. Spending more than the upper limit on your card can cost you significantly each time. Paying the full amount can save you more than a few bucks each time and credit card companies usually reward you for this kind of behavior.
- Don’t get too many cards at one time
Using too many cards simultaneously can stack up debts. It will also keep you from optimizing the rewards on a particular card. Usually, each credit card comes with a spending goal and owning too many will incur costs since not meeting these expense goals can attract penalty.
- Use the cards wisely
Do not keep your credit cards aside for emergencies only. Use the cards from day to day for paying energy bills, grocery bills, monthly medical bills and insurance premiums. It is imperative for the user to keep the same amounts aside to pay off the credit card bills for the next month. However, expecting to whip a credit card out during a medical emergency or automobile repair job might not be its ideal use. You may wait for months for an incident that does not happen. Moreover, you will fail to meet the monthly or yearly spending goals on your card. Always use your credit cards regularly for the items you can pay off each month.
- Negotiate better terms
Nothing works better than speaking with your credit card vendor for reconsidering their EMI interest rates and APR. Long-term customers are valuable for every credit card company. You have full right to call your company and talk about amicable interest rates. Try stating that you are leaving your current company for a new one and wait for their response. This trick always works with the corporate vendors, who are striving in an uber-competitive fintech market.
- Never withdraw cash advances
Cash advances provide credit card users with easy money within their reach 24 x 7. However, you must always consider the real cost of a cash advance before you avail the service. A credit card company can charge you between 14% and 39% for cash advances. Considering the convenience charges, these cash loans are not even worth it.
The smart tech-savvy individuals and fintech experts can save money each day by using their credit cards wisely. It takes a little know-how and a lot of calculation, but at the end of the day, leveraging your credit card can save you a lot of money.