If they are used in the correct way, credit cards can be valuable tools. However, for many card-holders, credit card usage only leads to one thing: debt. If you can avoid falling into too much debt when you use your credit card, you can enjoy some of the lesser-known benefits of making purchases with plastic. Here are some insider’s tips for getting the most out of your credit card’s features.
- Consider a price protection program if you are making a major purchase. Many credit cards offer price protection services to card-holders who make a purchase and then find a lower price the next week or next month. These programs require a small monthly fee, but they can lead to significant savings, especially for purchasers of high-tech devices (that often drop in price a month after their initial release). Price protection is available up to 90 days after the purchase date.
- Never carry a balance on a rewards card. If you have a card that gives you points, airline miles or cash-back bonuses, you will need to be very careful so that fees and interest payments do not cancel out any gains made by collecting the points. How can you make sure you are getting the most value out of your card? Pay off the entire balance every month to avoid any interest payments.
- Beware of balance transfer fees. Many cards offer 0% introductory interest rates on balances transferred from other cards. This can be advantageous for paying down your debt, especially if the 0% period lasts for more than 6 months. But there is usually a catch to this deal: credit companies charge a one-time fee of between 2% and 5% of the amount transferred. This can be a pretty hefty sum if you are transferring a large balance. Occasionally cards will waive this fee for people with good credit. If you are transferring from a high interest card, a balance transfer is still a good idea, but you’ll have to be aware of these semi-hidden fees.
- Look for hidden perks. Did you know that Capital One card-holders can call the company if they need roadside assistance? Or were you aware that some American Express Cards can get you access to airport lounges around the world? Cards have perks that are sometimes advertised and sometimes not advertised. Yet, with so many cards offering similar services, some of these extra perks can be the things that help you choose the best card for you.
- Find a card that fits your lifestyle. People are seduced by the idea of rewards cards because there is an element of “getting something for nothing.” However, most card-users get very little out of their rewards programs because they do not use their card enough. For most people, a basic card with a low interest rate and no annual fees is the best option. People who are still interested in a rewards card can choose one that rewards everyday purchases like groceries or gas.
- Some extras can be worth it (but most are not). When you activate a new card, you usually get a long sales pitch for extra add-on options from the customer service operator. Before you say no, there may be a couple of extras worth considering. If you have low credit, a payment protection plan might be in order. This plan protects you from penalties if you occasionally miss a payment. This can also be useful if you have a 0% introductory rate that you will lose if you make a late payment. Make sure that the price for this type of program is right (no more than a couple of dollars each month).