How to Make the Most of Your Credit Cards

There is some truth to the statements above; credit card debt is considered bad debt since it’s a high-interest debt used mostly to purchase depreciating assets. And many fee-harvesting credit cards do exist, though these have decreased in number since the sub-prime credit market collapsed. Paying with cash is a good idea for many purchases, but it’s not always the most advantageous strategy.

So how can you make the most of your credit cards? First, know how to use them right. Use reward cards to earn cash back for daily purchases. Try not to carry a balance from one month to the next. If you do carry a balance, it will be subject to interest – some of the highest rates in the financial industry. If you must make a big purchase, use a 0% interest card that allows you a year to pay back the balance before interest is applied. Any interest you pay on depreciating assets like clothing and food is money down the drain.

Second, know how to pay for your cards. It’s imperative to make your payments on time. Right now, lenders have plenty of problems of their own. You’re not likely to find much sympathy if you make a late payment. In fact, good customers who are late by a single day find themselves slapped with 30% penalty interest on their card balances. If you think you’re going to be late on a payment, contact your card company and see if they’ll work with you. Better yet, make credit purchases in affordable moderation and avoid this situation altogether. When it comes time to pay off your cards, tackle the high-interest ones first. You’ll save money in the long-run.

Finally, know how your credit cards affect your credit report. Most lenders want to see a mixture of credit types, including revolving credit accounts. Credit cards are a prime example of revolving credit. When a lender sees that you can handle your spending, they’ll be more likely to lend you money. Also, your amount of available credit is very important. If you have a lot, your credit score will surge. But if you’ve charged up most of your available credit, lenders will see you as a risky overspender. You’ll have a hard time getting loans of any kind.

Credit cards are a convenience, not a right. Use them wisely, and you won’t struggle with the burden of debt that too many Americans have accumulated.

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