When used improperly, a credit card can be a very expensive way to make a transaction. The most important rule in using a credit card is to pay off the entire balance on time every month. If you follow that rule, then using a credit card can be a wonderful financial tool for you since it gives you an accounting of your purchases, some additional protections, allows you to carry less cash and can help you earn rewards for every purchase.
Here are some other credit card tips and tricks:
Use Your Credit Card All the Time
A lot of people are hesitant about using their credit cards because they fear falling into debt. That's a logical concern, but if you are going to make that purchase anyway, it is better to use a credit card. As long as you don't spend more on your card than you would spend in cash or from your bank account, you're not doing anything wrong. You can pay off the card before the due date.
Why do you need to use your credit card regularly? A few reasons: (1) using your credit card helps build your credit score, as long as you make good payments on it; (2) using your credit card shows consistent activity on your account, which may lead to an increased limit in the future; and (3) using your card will increase the rewards you can earn. Long story short--use more, gain more.
Pay Attention to Your Rewards Program
Do you know how your rewards program works, or do you just swipe your credit card hoping for the best? Most people are surprised to see their rewards stack up, but that is because they don't know how to get the most rewards possible. Many cash back credit cards offer more cash back during certain parts of the year where revolving categories may have 2% to 5% cash back on purchases. For example, from July to September 2013, Discover It offers 5% cash back on gas station purchases. Last quarter, that 5% was for home improvement stores. If you know when your credit card rewards kick into high gear, you can modify your spending habits to generate more rewards.
Instead of revolving rewards categories, some cards pay a greater amount for specific types of purchases. If the card offers 3 points per $1 spent on utility bills, use your card to pay for electricity, water, etc. If your card offers 10 points per $1 spent with a certain airline, make sure you book a flight with that airline. The more you are aware of these offers, the more you can generate from these programs.
Never Spend What You Can't Pay Back
You cannot use your credit card with the thought of eventually paying it back--this will lead to debt very quickly. Instead, you need to come up with a logical time frame you can stick to in order to pay off your balance, and then make these payments. Ideally, your checking account should already have the money for your credit card purchases so you can pay your balance immediately. You will still get the credit from the transactions, but you won't have to pay interest on the balance.
Sign the Back of Your Card Right Away
That little signature strip on the back of your credit card is there for a reason. It identifies you as the cardholder and verifies your identity if you ever lose the card. If you do not sign the back of the card, anyone who finds the card can potentially sign it instead. It is better to have your signature on the back for security purposes.
Monitor Your Credit Card Accounts
With online capabilities, it is easy to keep track of your account. Use this to your advantage to watch for unauthorized charges. You can sign up for email alerts every time a transaction goes through, and then you will know if someone else is using your card. It is much easier to get fraudulent charges solved if you catch them early. Pay attention to your account, and you will avoid any unnecessary hassles.