Sunday, November 4, 2007

Maximize Credit Card Use

Yes, credit cards have a bad reputation in the eyes of most people. We all do it though- we get mad because we pay one of our credit cards a little late and then get hit with late fees, or worse, an interest rate hike on all of our credit cards.

You can really maximize your card usage though, and get more out of your rewards programs and get more control over your finances if you were to use your credit card to pay for all of your bills, purchases and expenses each month.

Now, if you do this- you have to be someone who has control! A lot can go wrong if you don’t keep yourself to a budget and make your payments on time. Done correctly, however, it has a ton of benefits!

1. Choose a Card with Appropriate Rewards

If you’re going to be putting all of your monthly expenses on your credit card each month, it makes sense to pick one with a rewards program that will offer you benefits that are actually useful based on how you use the card.

2. Know the Details of Your Credit Card

Most credit cards offer a grace period. This is a time when you can repay your purchases without paying interest or finance fees. Usually it’s around 25 days. When picking a card to use for all of your expenses each month, you should find one with the longest grace period you can find! Also, be sure you know what your interest rate will be on purchases, and what happens to it if you should make a payment late. Will the interest rate go up? How much is the late fee?

3. Set Up A Budget - and Stick to It!

If you decide to spend more than you can afford just because you’re using a credit card instead of check or cash; you’re going to be in some serious financial trouble! To maximize your credit card use and make the card work for you, you need to determine how much you can spend each month on the card and don’t buy more just because it’s easy to overspend with the card! You already have a good idea what you pay each month in utilities or mortgage payments; prescriptions, groceries and vehicle loans. Factor those item as well as miscellaneous monthly expenses and entertainment costs into your monthly budget and then don’t go over it.

4. Set up your Payments

If possible, use your automatic payment plan with your credit card and let them take your payment from yoru checking account automatically each month. Also, try to set up the payment so it is within the grace period to avoid interest fees. If that isn’t possible, you may be able to log into your online account management system and make payments early there and avoid fees.

The benefits of paying for your monthly expenses with a credit card include;

  • taking advantage of the rewards program and gaining the maximum benefits
  • seeing exactly where your money goes each month
  • getting more control over your budget
  • obtaining the ability to set up a savings plan (now that you know exactly where your money goes!

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