Many people avoid credit cards because they feels it’s the safer option, and it’s easier not to break their budget. Meanwhile, others use credit cards for the wrong reasons and end up paying through the nose. In fact, a credit card can be a useful financial tool that can not only help you save money, but also allow you to earn extra cash… if it’s used wisely. Following are our best tips and tricks on how to save money with your credit card:
Maximize Your Statement Cycle
Cardmembers who pay their balances in full each month to avoid interest are basically receiving a free short-term loan from their bank. Keep in mind that a purchase made with your credit card the day before your statement closes will be due 20-25 days later. A charge made the day after the statement cycle ends, however, will not be due for an extra 30 days, which means the cardholder can get an interest-free loan for a total of 55 days. By being aware of your statement cycle—or requesting it be adjusted to better meet your financial needs—you can provide extra flexibility to your own financial situation.
Use Caution When Consolidating Balances
Many consumers feel they are saving money if they transfer balances from one card to another in order to utilize promotional offers, such as 0 percent for a period of months. Be aware, however, that many of today’s cards include a balance transfer fee equal to an average of 3 percent of the balance transferred. Analyze such offers before accepting them and make sure the fee doesn’t end up costing you more than the interest saved during the promotional period.
Wisely Use Rewards Cards
You may think you’re getting a great deal with that cashback card, but you’re really only benefitting if you then pay those purchases in full each month to avoid interest. After all, what good does it do you to earn that $10 back each month if you then are charged $17 in interest? If you aren’t able to pay in full each month, you are better off finding a non-rewards card that offers a lower APR.
Pay More than the Minimum Payment
Obviously, the most cost-efficient way to use a credit card is to pay the balance in full each month and avoid interest. But if you find yourself in a situation where you must carry a balance, you should still pay more than the minimum payment to save interest in the long term. A customer with an average APR could spend 10 years paying off a meager balance with minimum payments while paying hundreds of dollars—or more—in interest during that period. Any extra money you add to your payment each month will significantly reduce that amount in the long run.
Don’t Carry Too Many Cards
You may think you’re benefiting by carrying several cards with different rewards programs, when you’re actually not using any single one enough to truly benefit from the cashback or points. Plus, having extra cards in your wallet might tempt you to overspend. Instead, carry one rewards card that you use for purchases you can pay in full each month and one backup card with a lower APR that you use for major expenses and emergencies.
Ask for a Lower Rate
If you develop a solid history as a cardholder, you might have some leverage when it comes to negotiating your APR. Remind your lender that you are a longtime customer, you always pay on time, and you have other options available to you. Some banks will be willing to reduce your rate to keep your valued business.
Don’t Use Your Card for Cash
Cash advances typically hold carry higher APRS—as much as double the interest rate for purchases. In the long run, the extra interest—as well as cash-advance fees—aren’t worth the convenience of using you card for cash. Likewise, avoid purchasing certain gift cards—especially Visa or MasterCard gift cards—that are considered the same as cash to the bank.
Demand a Chargeback
If you are unhappy with the goods or services provided by a merchant, or if you feel you’ve been charged without your authorization, make sure you are familiar with the chargeback process, which refunds your money in the case of a dispute. If you’ve already spoken to a supervisor at a business and received no accommodation, threaten to chargeback or dispute the charge with your card company. Many merchants will quickly change their tune since their fees can be greatly increased by a large number of filed disputes. Once you’ve made the threat, don’t hesitate to call your lender and follow through, which will often result in a refund.