Most advice about credit cards warns you about the dangers, the risk of getting in debt, and the potential for paying hundreds of dollars in interest and fees. While there’s some truth to this, the whole truth is that it depends on how to use your credit card. You can make big mistakes, rack up a lot of debt, and ruin your credit. You can also use your credit card responsibly, learn the rules, build your credit, and use your credit card to save and earn money.
And you can do it without getting into debt as long as you follow two basic rules: charge what you can afford and pay your balance in full every month.
Transferring a balance to a lower interest rate credit card.
If you’re currently carrying a balance on a credit card with a high-interest rate, you can save hundreds of dollars by transferring that balance to a credit card with a lower interest rate. Taking advantage of a 0% APR balance transfer offer will save you even more money as you can avoid paying interest for up to 21 months depending on the credit card you choose. For example, you can save almost $400 by moving a $3,000 balance at 17% to a credit card with a 0% APR for 12 months, if you can pay $251 each month.
Using 0% purchase APR for big purchases.
In the past, 0% introductory rates were offered only with balance transfers. Now, quite a few credit cards offer 0% introductory APR on purchases as well.
If you have a big ticket item to purchase – new furniture, a medical procedure, or vacation – using a credit card with a 0% APR will let you break up the purchase in multiple payments and save money on interest.
Paying for everything with a cash back credit card.
Cash back credit cards let you accumulate cash rewards on your credit card.
If you can use your credit card to pay for pretty much everything, and not just those purchases that earn the most rewards, you can max out your cash earnings. For example, if you spend around $3,000 each month on bills and other expenses, you can earn $360 a year on a card that pays just 1% in rewards.
Applying for a credit card with a signup bonus.
There are more than two dozen credit cards with signup bonuses on the market right now. Bonuses range from cash back to free hotel stays and points you can use for airline tickets. Earning the spending bonus only requires you to spend a certain amount on the credit card within the first few months of having the credit card. If you can meet that requirement, the bonus is yours.
Redeeming your cash for a gift card.
While cash may be the more versatile reward – you can use cash anywhere – you can maximize your rewards if you redeem your rewards for a gift card with the credit card issuer’s rewards partners. For example, you may be able to redeem $20 in cash rewards for a $25 gift card.
Skip the car rental insurance.
Using the car rental agency’s rental coverage can increase the price of your rental up to $20 each day. That’s $140 if you rent a car for a week!
Most major credit cards provide car rental insurance as long as you decline the coverage offered by the car rental company and pay for your rental with your credit card.
Use your credit card issuer’s discount mall.
It takes a bit of planning ahead, but you can save money on dining, movie tickets, flowers, and more by making the purchase through your credit card issuer’s discount mall. Take a look at your credit card issuer’s online discount mall to see which retailers offer discounts.
Earn free travel or hotel stays.
Use a travel rewards credit card to earn miles or points that you can redeem for a free flight or a free hotel stay. You can use the free flight for an annual vacation, holiday travel, or weekend getaway.
Shop on retail cardholder discount days.
While retail credit cards aren’t the best credit cards to have in your wallet – because of the high-interest rates and limited use – some have great rewards programs offering perks like special discounts days for cardholders.
Gap, for example, offers a 10% discount for Gap and Gap Visa cardholders each Tuesday. Read through your rewards program or call your card issuer to find out if your retail credit card offers special cardholder discount days.
Don’t you hate to purchase an item and go back a few days later to find that it’s marked down to a lower price? Your credit card may refund you the price difference. You have price protection if you have any Discover or Citi credit card or Chase Freedom or Sapphire Preferred. If you have any other credit card The ease of getting the benefit depends on your credit card. With Citi, you only have to register your item with the online Price Rewind tool. Discover and Chase require you to complete a claim form and provide a receipt showing your purchase and a copy of the claim form.
Extended warranty benefit.
You want to purchase the extended warranty on expensive electronics, but spending extra money isn’t an attractive option. If you use the right credit card, you can automatically get extended warranty and save that money. Check your credit cards before you shop to learn whether any of your cards have extended warranty and what you have to do to take advantage of the benefit. Keep your purchase receipt for the duration of the warranty so you can easily submit a claim in the event of a product failure.
Pay no foreign transaction fees.
Most credit cards charge a foreign transaction fee, usually 3% of the transaction amount, on purchases you make in other currencies. If you travel internationally, these fees can add up quickly. Capital One waives the foreign transaction fee on all its credit cards. So, if you’re going out of the country, a Capital One credit card is the best to use for your purchases.
Get More From Your Credit Card
None of these benefits is worth it if you carry a balance and pay finance charges. Pay your balance in full on time each month to avoid paying interest and late fees.