Get More From Your Credit Cards
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With credit cards, you pay to play. There are rewards, promotions and other perks for the taking, but you have to use them to reap any benefits. Minimizing fees and finance charges are just part of the game.
So how can you get the most from your cards while avoiding all the pitfalls?
The good news is there's plenty you can do to make your credit cards work for you. By utilizing little-known perks, taking advantage of lower interest rates and using other strategies, you can get control of your plastic and actually profit from it.
Here are five tips for getting the most bang for your hard-earned bucks.
How to Take Advantage of Credit Card Rates
If you're going to carry a balance on a new credit card, look for a low interest rate.
For many people, credit card annual percentage rates, or APRs, are averaging between 13% to 15%, says John Ulzheimer, president of consumer education for SmartCredit.com. "But some issuers are going as deep as 7.9% on their rates."
You can also use zero percent introductory rates to your advantage.
Thanks to the Credit Card Accountability, Responsibility and Disclosure Act of 2009, or CARD Act, introductory rates have to stay in place at least six months, as long as you pay on time. So you have that period to put your entire payment toward your balance, he says.
If you're taking advantage of a balance-transfer offer, make sure you understand how the transfer affects your credit score.
Pro tip: Don't close the old account after you transfer that balance, says Ulzheimer.
While your credit score could take a small hit when the new credit card issuer checks it, having additional credit at your disposal could actually improve your score over time.
Remember not to start running another balance on the old card. Use it just enough -- once every few months for something small, and pay it off in full -- to keep it active.
What's the Best Way to Use Credit Cards?
Use your credit cards wisely, and you can gain a free short-term loan on purchases. Pile up balances or pay late, and suddenly you can face expensive debt, fees and other penalties. The secret of smart card use: Take advantage of the perks, and avoid the penalties.
"If you want to maximize the value (of your cards), you don't want to rack up costs," says Josh Frank, senior researcher at the Center for Responsible Lending. "And with a balance, you rack up costs."
Also important: making payments on time, he says. Not only do you avoid penalty fees, but you also avoid onerous penalty-rate hikes.
Some issuers also put your rewards at risk when you pay late, says Frank. You may stop accruing rewards, lose the rewards you've already accumulated or get charged a fee to regain them, he says.
Paying late can even lower your credit score if the delinquency winds up on your credit report.
Want to save money? If you carry a balance, you're probably better off with a lower rate than a rewards card, says Frank. Often what you pay in interest is more than what you make in rewards, he says.
And forget using your card at the ATM. Skip those cash advances, says Dave Jones, president of the Association of Independent Consumer Credit Counseling Agencies.
"The interest rates on those are always very high," he says.
Why You Should Ignore Credit Card Rewards
Put credit card rewards out of your mind.
Use the cards as you normally would, giving no thought to rewards programs, says John Ulzheimer, president of consumer education for SmartCredit.com.
Instead of monitoring the rewards account, let it build and make a note to check on it after a few months.
"It's a nice surprise," he says, and you don't end up funding your own credit card rewards program.
When you focus on spending to maximize rewards, there's a good chance you'll start running a balance, says Ulzheimer. When you run a balance, you're paying the credit card issuer far more than you're receiving in rewards -- so that's a losing proposition, he says.
One caveat: Check in often enough that they don't expire, says Josh Frank, senior researcher at the Center for Responsible Lending.
Rewards sometimes have an expiration date and program rules can change. "If you wait long enough, you can have the rules changed on you, and often that's in unfavorable ways," Frank says.
Beyond Credit Card Rewards: 3 Hidden Perks
Everyone knows about miles, points, cash back and other credit card rewards. However, some credit cards offer other perks that can be just as valuable.
Here are a few credit card benefits that can save stress and cash.
- Extended warranties. You can often secure an extra year on a warranty just by buying with the right credit card, says Linda Sherry, director of national priorities for Consumer Action. That means you don't have to spend your own money to extend the warranty, she says.
- Traveler's services, such as roadside assistance, travel insurance and lost-bag coverage.
- Theft, breakage and loss protection, or purchase protection, for items bought with your credit card.
If you familiarize yourself with the fine print or make a quick phone call, you may discover a few hidden perks on your credit cards that can save you money.
How to Get Shopping Deals from Credit Cards
If you're a savvy shopper, you've probably figured out how to scope out the sales, score the deals and get goods and services for less.
However, you might be able to get even better deals using some of the credit cards that are already in your wallet. That's because some credit card issuers and payment networks offer special discounts to cardholders.
The specials vary, and the steps you take to get the deal may differ with each credit card.
You may have to start your online shopping at your card issuer's website before you go to the store sites you like to shop at, says Linda Sherry, director of national priorities for Consumer Action. You may have to register or enroll to get the deals, she says.
The issuer may also use social networking to deliver discounts, such as the recent partnership between American Express and Foursquare.
To find out what's available, visit your issuer's website and/or the payment network's site -- such as Visa or MasterCard -- periodically. Read those inserts that come with your bill, since they can alert you to special promotions.
If you have general credit cards affiliated with certain stores, using them when you shop at those venues can often earn you "preferential treatment," says Sherry. Frequently, "you can get some perks."