Despite how often they are used today, credit cards have a bad reputation among consumers. Contrary to most consumers’ beliefs, it is possible to save money while using one. Some professionals actually improve their financial states by using credit cards. As a professional struggling to maintain a healthy financial status, you need to learn how to use your credit card effectively. Continue reading to discover the top ways to save money using your credit card.
Take Advantage Of Grace Periods
Each credit card comes with a grace period, also known as interest-free days. While you always want to find the best APR credit cards, taking advantage of grace periods is a highly effective way to minimize your interest as well. Your grace period consist of the number of days that the credit card company won’t charge interest on purchases you make on your card. You can take advantage of your credit card’s interest free period by putting all your living expenses on your credit card. Then, put the money you would have spent on your living expenses to a high interest account. Then, you can accrue interest during the interest free period. In order for this to work, you must be disciplined enough to remember to pay off your credit card balance before your statement’s closing date.
You’ll need to know your credit card statement’s closing date to maximize the number of days in which you earn interest on your living expenses. Keep in mind that because your payment due date would vary for each purchase, it is easier to pay off your balance just before your statement closing date to avoid accruing interest on your credit card balance.
Build Your Credit History
Credit cards can help you build your credit history and your credit score. Finance companies, including credit card companies, use your credit score and credit history to decide whether or not to offer you credit. They also use these two measures to determine the terms of their offer, such as the interest rate, payment terms, etc.
The higher your credit score and the longer your credit history, the better rates you’ll get for personal loans, home loans etc. If you don’t have any credit history, you can start building your credit history by getting a credit card. It doesn’t have to cost you anything as you can get a credit card with no annual fees. Simply use your credit card and pay it off immediately to start building credit and improve your credit score. While you don’t really make any money by doing this, it can help you save money in the future when you apply for a loan.
Get Fraud Protection
Most credit cards come with some form of fraud protection, which is necessary to stay safe especially when shopping online. Many cards monitor your purchasing habits and will notify you when your card activity looks suspicious. In addition, you can quickly notify the company if you’ve noticed your card has been used fraudulently, lost or stolen, and then you’re not held responsible for those specific transactions. The credit card companies are also good at reimbursing you for any fraudulent transactions on your account. Unlike with other forms of payment, if you get defrauded while using your credit card you are more likely to get your money back from the credit card company.
Apply For Price Protection Insurance
Price protection and purchase protection insurance are handy ways to save money when shopping. Price protection insurance pays the difference if something you’ve bought is sold at a cheaper price or the price has dropped. Purchase protection covers products you’ve bought. This protection will pay if an item you’ve bought is stolen or lost in the mail. It will also cover any damage to the product in transit. The terms and conditions will vary from card-to-card, so it pays to read all the cards terms and conditions in order to take advantage of price and purchase protection insurance.
Get Travel Insurance
Many premium credit cards come with complimentary travel insurance. Complimentary travel insurance is a coverage that protects you when traveling domestically or abroad. This coverage varies by card, but most coverage includes the following:
- Lost or damaged luggage
- Trip cancellation fee
- Cancelled or delayed flights
- Liability coverage if you damage someone’s property or accidentally hurt another person
- Injuries that occur during some form of transportation
- Medical coverage for hospitals and doctors if you get sick or are injured overseas
Complimentary credit card travel insurance could save you money on your travel insurance, and most credit card travel insurance these days are just as good as a standard Annual multi-trip travel insurance, if not better.
Consider Getting A Rewards Card
Consider getting a rewards card when you are choosing a credit card as well. Rewards cards offer incentives for making purchases on your credit card. Generally, rewards are offered as air miles, points and cashbacks. Points and miles can be redeemed for gift cards, travel or cash. The specifics vary for each card.
The key here is not to overspend in order to earn rewards. You need to avoid buying things just to earn points. This is where a good plan comes into play. Take a look at how you use your credit card each month. Know your budget and then find the program that works best for you. Look for the one that earns you the most rewards for your normal spending habits and remember to always pay it back each billing cycle.
Pay Attention To Signup Bonuses
Signup bonuses are rewards that credit card companies offer when you sign up for a new credit card. You’ll typically find these bonuses come with a very high number of points—possibly in the tens of thousands. These are great programs, but again, it’s necessary to do your homework and read through each card’s terms and conditions before signing up.
Sign up bonuses typically specify that you spend a required amount before earning your bonus points. The danger here is that you may spend just for the sake of earning the points. Make sure the rewards are worth the risk.
To save money using your credit card you’ll need to be disciplined and make sure you do not carry a balance on your credit card each month and also avoid some of the common credit card traps and pitfalls. With these basics in mind, you can make your credit card work for you and you could end up saving a lot.