How to Make your Credit Card Work in your Favor

Chances are that most adults have access to at least one credit card and often more. This can often lead to a lot of debt and hassle. But credit cards do not have to mean financial trouble. The San Francisco Fire Credit Union states there are ways that you can make your credit cards work for your benefit and not your financial detriment.

The first thing you must do to make your credit cards a benefit to you is to pay off the balance according to Investopedia. Until that balance is paid off, it will continue to accrue interest, and often those interest rates are very high. All of that money being paid to interest is just money being thrown away. Think about it this way: You have a $5,000 balance on your credit cards and are being charged 15 percent interest. If you pay only $100 per month, then it is going to take you almost six years to pay off that balance and you will be paying over $7,600 including interest. That is $2,600 in interest alone, money that you will never get back. It may not seem like a lot of money in interest month to month, but if you look at it in bulk, then it is rather shocking. The only way to start over with that interest is to completely pay off your balances.

Once your credit cards are paid off, look at which ones have the most potential to be a benefit to your finances. Which cards have a reward program? Which ones charge an annual fee? Which ones have the highest interest rates? These three questions will allow you to know which cards to keep and which to get rid of. With the abundance of credit cards that have no annual or monthly fee, there is absolutely no reason to keep one that does. Again, that is just money being thrown away for no additional benefit. The same is true of a rewards card, there are so many available there is no reason to keep one that isn’t.

If your card does earn rewards, then it is important that you understand how the program works. Do those points that you accumulate expire after a certain amount of time? If they do then you need to determine if you will actually earn enough rewards to use them before they expire, otherwise there is no point to earning them at all. What can you get for your rewards? You need to know that you can use your rewards for something you actually want. Maybe you like to shop at a particular store; if you do, then it is a benefit to you to know that you can redeem your rewards for a gift card to that store. The most ideal way for you to redeem those rewards is as a credit on your card balance. That is essentially having the credit card company pay you to use their card and then pay off your purchases on that card.

Another thing you can do to make your credit cards work for you is to use the card for purchases that you already have the money for. This is everything from gasoline, groceries, utility bills or loan payments. You already have the money in your account because it was a bill you had to pay anyway. But by using your credit card to make those purchases, you are earning rewards from purchases that you would have made anyway.

Lastly, try to pay off the balance in full by the due date every month. If you are only using the card for purchases that you would have made anyway, then this should be easy since the money will be in your account. Unless you pay off the balance in full every month, you will start accruing interest again and your cards will no longer be working for you.