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Home >> Lending >> Credit Cards
How to Use Your Credit Card to The Max
As credit is drying up everywhere, you maybe wondering how you can get the most out of the credit you already have. Even if you are paying on time, there are several other ways you can take advantage of your credit and make it work for you, not against you. Below are four tips to help you use your credit card to its maximum benefit.
Tip One: Avoid All Those Fees
Everyone knows how annoying a late fee can be, especially if you missed the payment cut off time by mere minutes or hours. Even more upsetting than missing a payment, is being charged an over-the-limit fee because your late fee caused your balance to exceed your credit limit. These fees can be avoided with online banking and scheduled payments.
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What you may not take into account are all the other fees you regularly pay your credit card company. If you transfer a balance, for example, most credit card companies charge you a percentage of the transfer. When deciding how much you save by transferring to a lower interest card, factor in these fees. Your credit card company also probably charges you a cash advance fee every time you access your cash advance credit limit. These fees can become quite costly, especially when added to the normally higher interest on cash advance plus potential ATM fees. You may also be charged anytime you use convenience options, which include paying over the phone using an automated system, heightened charges to speak to a customer representative and make a payment, and finally for the immediate posting of a payment.
Most of these fees can be avoided by carefully reviewing your card's policy and planning ahead. Send in your payment early or schedule it in advance so you don't need to immediately post the amount. Additionally, if you need to take out a cash advance, minimize fees by taking enough money out the first time, rather than having to continually access your cash advance limit.
Tip Two: Stay Below the Limit
Staying below the limit is imperative not just to avoid those pesky charges, but to keep your interest rate low. Most credit cards have clauses in the contract which allow them to raise your interest rate if you miss payments or if you go over the credit limit. To protect against this problem, always leave extra room on your card. Reserve $100 or some other sufficient amount to cover any charges you may have forgotten about or a fee you did not expect. As a second measure, always carefully record charges and double check those charges against the information posted online to make sure everything is correct.
Tip Three: Use Those Rewards
You signed up for a specific credit card because you liked the rewards it offered, whether that was for free hotel stays or accumulated points that allow you to buy items out of a catalog. Some cards even allow you to earn money for purchases that pays directly to your student loans. However, all the rewards in the world are not worth it if you either pay interest on your balance, which by far outweighs whatever cash back you receive, or if you allow those benefits to expire. Avoid using your card simply to receive benefits if it will cause you to pay interest. Also, use online account access to keep up with your rewards and utilize them to help pay for your next trip, student loan payment, or gift.
Tip Four: Watch For Changes in Your Terms
Most changes in terms are included in your credit card statement. Some companies do not include them in your online information if you receive paper copies as well, so even if you check online account information, you should still open all those snail mail copies. If your credit card company is changing when they will raise your interest rate based on late payments or over-the-limit transactions, the information will be included in the terms. Also, the company might be changing how or when you make your payment, the cut off time for payments, or many more important details about your account. Often if you are unhappy with these changes, you have the option of not accepting them. What this means is that your current terms will stay in effect until the expiration of your card, at which time the card will be closed. In most cases, you only have so long to notify the company you do not wish to accept changes in the terms, so check your statement every month.
Published on BankingQuestions.com 3/17/09
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