How Credit Cards Play a Key Role in Financial Success
Credit cards play a central role in all commerce, as they are convenient substitutes for cash or check. A credit card is not only easier to carry than cash, but it is also safer because of fraud protections if your card gets lost or stolen. That’s something you can’t say about cash — once it’s gone, it’s gone for good.
A credit card can sometimes seem like free money, so it’s best to take some time to learn how to use it wisely so you don’t fall into deep debt.
How to Use Your Credit Card
Credit cards are so convenient because they are accepted virtually everywhere and don’t require hitting the ATM or carrying around cash. Just swipe your card or insert the chip in the card reader, and you’re on your way. But this swipe-and-go process can also lead you down a dark path of interest-bearing debt.
Using Your Credit Cards Responsibly
Credit cards can be amazing when you use them correctly. They can earn you free vacations and cash back, but they can also open a pit of debt that can throw your financial situation for a loop. Here’s how to use them responsibly:
- Spend within your means. Banks will occasionally call and offer higher lending amounts based on your income and credit card payment history. Make sure you are still leaving within your means even if you have a higher limit.
- Never buy anything with a credit card that you do not have the cash to pay for.
- Compare credit card offers often and focus on those with o% interest and reward points. Once you have opened an account, you don’t have to keep it.
- Always pay your credit card in full when you receive your statement
How a Credit Card Can Benefit You
- Convenience: With a credit card in your wallet, you rarely ever need cash or an ATM.
- Efficient record keeping: Easy expense monitoring and monthly budgeting through monthly statements.
- Instant cash: You can get quick cash advances when you need them, instead of applying for personal loans.
- Purchase protection: Credit cards often offer extended warranties on items you purchase.
- Balance surfing: You can quickly transfer your high-interest balance to a lower-interest card.
- Perks: Credit card holders often earn reward points for using their credit cards, which they can redeem on travel, cash back and more.
What to Consider Before Getting a Credit Card
A credit card can be useful and destructive, so before you compare credit card offers, ask yourself these questions:
- Can you limit use to just your daily expenses?
- Are you committed to paying your credit card off each month to avoid interest charges?
- If it’s a variable-rate card, can you afford the constant interest rate fluctuations?
- What credit limit do you need? Use the calculator at Financer.com to compare 29 lenders limits.
What You Should Know About Credit Cards Rates, Fees and Penalties
Card issuers often find subtle ways to take money from you. Balance transfers and cash advances, while attractive up front, include fees. Some companies even charge a yearly fee just for having the card.
These fees are part of what allow credit card companies to offer these types of deals. Make sure you weigh out all your options before taking advantage of these and other offers.
You also need to take penalties into consideration when shopping for a credit card. Late on your payment? There’s a penalty. Go over your limit? There’s another penalty. Each credit card has different penalties, so make sure to review these on the off chance you run into one.
How to Find The Best Credit Card Rates
Credit card rates can vary greatly between issuers, and the only way to find the best one for you is to shop around. But don’t search at random. Instead, write down a list of what you need in a credit card and put them in order of importance.
This will help you whittle down the massive list of available credit cards to just a few that offer the best benefits for your situation and help you learn how to compare credit cards.
Here are some of the rates to consider when shopping for a credit card:
- Promotional interest rate
- Fixed interest rate
- Foreign transaction rates
- Balance transfer rates
How Can You Lower the Interest Rate on Your Card?
Since you agreed to the credit card terms, you may have a hard time getting the issuing bank to reduce the interest, but it’s not impossible. Here are a few tips to help drop that interest rate:
- Call your lender and ask for a lower rate.
- Search for new-customer deals for your card and request that rate.
- If all else fails, sign up for a new card with a lower rate and transfer the balance.
Always remember that credit cards are like any other financial service: Everything is negotiable. Don’t be afraid to call your credit card company and ask them to lower your interest or waive an annual fee.
The worst the company can say is “no.” But if you have a steady payment history and have been a customer for a few years, you may be surprised at what you can ask for and receive.
