With over a billion credit cards in circulation, an average of 4 cards per American citizen. It is a safe bet to assume that you probably own one too. There are two types of credit card users:
(1) “The Ideal user”… he pays the minimum payment every month and makes the credit card issuer tons of money. (2) “ the deadbeat user”… He pays his card in full within a month and profits from their credit card issuer.
Now kids… you always want to be user number two, that’s if you want to live a stress-free, debt-free lifestyle with a good credit history.
In This article, you going to learn some Juicy actionable tips to karate chop your credit card providers and get all the perks credit cards have to offer.
Let’s jump right in!
Pay off your bill by the end of the month
If you are like most people (including me) you probably live off your credit card, due to the convenience, you swipe almost everything with your card(s). But if you don’t make full payment within that month, you end up paying more than you realize.
Credit card issuers are raking so much money from their customers, one of the reasons is that 38% of card users admit that they didn’t do anything in the past year to try lower their interest rates.
14% saying they didn’t know how to lower their interest rates even if they wanted to.
Making a full payment towards your credit card before the month ends is like having a free short term loan.
Doing this means you save yourself from the hundreds of dollars you would otherwise be paying in interest to your issuer.
Paying your account in full before the end of every month means you will dodge a major bullet, like:
- Paying the APR (Annual percentage rate) that’s typically 14% on the remainder
- Pay a whopping fee usually around $35 whenever you miss a payment
- The fees associated with making a payment a day or two later.
Let’s be realistic though… no one is perfect. So in those rainy months when you are unable to make a full payment, try to pay at least double the normal payment
Let’s unpack this…
Below are two credit cardholders that took the very same deal, just made different choices along the way.
Idiot Isaac vs Smart Sarah: Paying off $8000 credit card debt @ 14% APR
It’s pretty clear that Smart Sarah has a better shot at paying off her debt in time compared to Idiot Isaac (who is probably gonna add on his current debt).
Though not obvious, credit card charges are some of the largest unnecessary fees you’ll ever pay.
Know how much your purchases really cost by using this free calculator
Get a credit card even if you have no income
One of the most common and often misplaced myths of all time ( at least regarding credit cards) is that you should NEVER own a credit card if you have no source of income.
Meaning most teenagers and young adults are not supposed to own a credit card.
Which couldn’t be further from the truth!
Uh… on second thought, that argument has some truth to it. It can be quiet tricky to get your first credit card ( especially when you are young).
But not all hope is lost… there’s a quick and easy fix to this.
You can get yourself a secured credit card. It allows you to put down some money in a savings account that will act as collateral for the credit card.
If you behave well for a few months, you will graduate to the normal credit card ( unsecured credit card). Go consult your bank about this.
See? quick and Easy!
Here is a bonus article on using a secured credit card wisely so you can graduate to the big leagues faster.
Choose a card that gives you great rewards
Most credit cards (in fact all) have some reward programs attached to them, some are required by law and some are additional perks used by credit card firms to attract and retain more clients.
These are hardly talked about, never mind advertised. It’s very important to know about them as they can save you a lot of money.
At the beginning of every year, try to call your bank or credit card firm and find out what type of perks you are eligible for… here is a line you could use on them:
“ I’ve been a customer of yours for the 5th year now and a good one if I might add, judging from my credit score of 750. So I’m wondering what options do I have in terms of special promotions and offers… I would appreciate some info on fee waivers and special offers that you use for customer retention”
That easy and short line could save you thousands by giving you rewards like:
- Special merchandise discounts
- Travel insurance
- Price protection
This is just the tip of an iceberg compared to what you could get by simply asking.
Be smart about how many cards you have
Yes, there’s no magic number of cards you should have. But the rule of thumb is 3 cards.
I know you don't buy any of this… but having multiple cards is actually good for your credit score.
Let’s take a look at Idiot Isaac and Smart Sarah for a bit…
Idiot Isaac only owns 1 credit card, he takes pride in it as he is able to pay it in full every month he uses it.
He has a Credit limit of $3000 and spends $2 600 for the month, pays it off before the month-end.
Though this is a smart move as he won’t be paying any interest… he wasn’t able to take advantage of his credit score as he now has a higher debt utilization ratio.
Smart Sarah on the other hand, has three credit cards, that she also pays in full.
She spreads her $2 600 expenditure for the month equally across her 3 credit cards
This slick move means… she will stay below the 30% usage of her card limit as recommended by credit score expert Liz Pulliam Weston. That will guarantee her credit score’s increase.
I know this doesn’t sound unfair… But that’s how the system works.
Though, keep in mind that having multiple credit cards you probably don’t need just to have a good credit score will land you in deep trouble.
Only get multiple credit cards if you have the means and discipline to pay them.
The bottom line is…
A credit card can either be a financial management tool or a burden to you… not both.
You can receive many benefits from your credit card, or you can pay a lot of money to your lender.
But one thing remains… a credit card is not just plastic — It’s Money!
You have the power to take it in any direction you want.
