There are plenty of credit card horror stories out there. From reading these tales, or hearing them from friends and family, it's easy to think that credit cards are a deceitful trap to be avoided at all costs. The truth, however, is much more positive. When used strategically, credit cards can help raise your credit rating to get you a better deal on a loan or mortgage. And many cards help you save money with rewards programs. Use these simple tips to make your credit card work for you, and not the other way around:
Shop for the best deal
As with any major financial decision, a little research ahead of time goes a long way. There are a dizzying number of credit cards to choose from, each of them with unique benefits and drawbacks. Depending on your credit score, you may not even be eligible for some of the best offers. It helps to first know your credit score, which you can do for free at AnnualCreditReport.com. According to the FTC, this is the go-to website to check your credit history. Once you know your score, you can search in a variety of places. The Consumer Financial Protection Bureau recommended starting with your current bank or credit union, as your preexisting relationship with them may earn you a better deal.
Pay off your balance every month
This is the easiest and most essential step to get the most out of your card, and yet it's the one most people struggle with. You should make every effort to pay off your balance in full before the deadline, and even earlier if possible. If you tend to make unnecessary impulse purchases, there are ways to curb the habit. Consider applying for a secured credit card, which is backed by a deposit paid before your card is issued. As NerdWallet explained, a secured credit card can boost your credit score if it is already low. Use this type of card as a stepping stone to one with a higher limit and more rewards.
"Don't let your discipline slip just for an extra 5 percent off."
Take advantage of rewards (carefully)
You've found the right card and have been paying off the balance in full each month. Now reap the benefits of your diligence and access the rewards your credit card might offer. It's important to stay informed on the exact terms of your card's rewards program. As Bankrate explained, some cashback cards may offer bonus points on different categories every quarter. You may even need to shop through a designated website to earn rewards points.
While the promise of free airline miles or saving on gas is alluring, these bonuses are only worthwhile if you actually plan to use them. In an interview with Business Insider, financial blogger John Ulzheimer cautioned against "credit chasing," or when consumers needlessly open cards or purchase items just for the points.
"Most people who find themselves in terrible credit card debt attribute it to using cards this way," he said.
Don't let your discipline slip just for that extra 5 percent off. Using your rewards responsibly means keeping your balance at zero, which will lead to even better offers down the road.
For more advice on getting the most out of your money, check out Cash Central's Budget Planning Tool.
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