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Make Your Credit Cards Work Smarter

Are you under a financial burden? With the array of facilities like credit cards and charge cards available today, it's simple and easy to find a way out. These facilities can ease your tension if you have the right card. 

Equally important, before selecting an appropriate card, ask yourself if you have good or bad credit. Do you pay balances in full or part payment? Do you travel often, use specific brands, or select apparel from designer stores? Answers to these simple questions lend valuable insight into the right card type to suit your needs.

1. What's Your Spending Profile?

It is important to realize your spending pattern. Analyze the results. Identify your spending style to match the habits with your card features. If you do not have good credit, avoid a secured card that requires collateral.

∎ Watch your spending pattern

Different credit cards offer more cashback or rewards. This depends on what store you shop at, or what kind of purchases you make. Such as recurring bill payments, groceries, gas, or restaurants. Analyze your spending pattern and payment habits before selecting a card. Start by accessing your bank or credit card statements for the past year.

  • Figure out what you spend most on.
  • Group into a cost category.
  • List optional expenses.

2. Match Credit Cards With Your Goals

It doesn’t matter how you approach or use the assessment. Maximizing your credit cards depends on how it best serves your end goal. Choose a credit card that fits both your spending and financial goals.

∎ Rewards, travel points, or cash back?

What category do you spend the most money on? This will determine what credit card would best fit your spending profile. Do you travel every year? Look at whether you want a reward travel point or cashback on purchases.

If you take a vacation every year, choose a travel reward credit card. If you want to save money, choose a cash-back credit card that can help boost your savings account. Ensure the cashback credit goes directly to your savings account to avoid spending it.

3. Check Payments On Credit Cards

You can download your financial debts straight from bank or credit card companies. Do you pay by cash, credit card, charge card, or through your debit card? Also, check whether you cleared the amount partially or fully. If you want to pay your balances in full or avoid paying interest, a credit card without any annual fee would be the best option, as compared to other cards.

You could also consider a charge or prepaid card to dodge the financial charges. On the other hand, if you carry forward a monthly balance. Then a credit card with a low introductory or fixed APR would be an ideal bet.

4. Compare Credit Cards

There are various online calculators you can use to compare credit cards. For the most part, you can input your income and spending to get a selection of different credit cards that are right for you. Look at annual fees, interest rates, interest-free periods, rewards options, etc.

∎ Do the math

If your card has an annual fee, calculate the expected reward over the course of the year minus annual fees. It might still be worth it if the rewards are higher. With this in mind, consider the interest and annual fees as the overall cost of using the credit card.

Conversely, some cards have no interest charges for 12 months but higher annual fees and other charges in small print. Compare these numbers and see which option works best for your goals.

5. Use Credit Cards Wisely

There is a right and wrong way to use credit cards. The right way is to make it work for you. For one thing, you will be saving and not pilling on revolving debt. If your card offers rewards, make sure you're maximizing them. This might mean using your card for certain spending categories, redeeming points for the highest-value rewards, or meeting certain spending thresholds to earn bonus points.

∎ Pay in full every month

The smartest way to use a credit card is to pay off your balance in full each month. This allows you to reap the card's benefits without incurring interest charges. Even one missed payment can hurt your credit score and result in late fees. Most credit cards charge a 20%-fee on balances. As a result, it's important to avoid having a balance on your credit cards so interest doesn't accrue. No reward earned is higher than 20% on balances carried over.

Set up automatic payments or reminders to always pay your bill on time. If this isn't possible, pay more than the minimum payment to reduce your interest costs. 

∎ Keep Your Credit Utilization Low

A good rule of thumb is to use no more than 30% of your available credit at any time. High credit utilization can negatively impact your credit score.

∎ Spend, spend, and spend

The way to get the most out of your credit cards is actually to use them. Maximize the spending on your credit card to get the most out of your rewards, points, and cashback. As much as possible, make all payments on your credit card. Automate bill payments, purchases, groceries, gas, shopping, etc.

If you're using a travel rewards credit card, make sure you actually take a trip with it. In addition, there may be other perks such as baggage loss insurance, access to airport lounges, etc.

∎ Avoid Cash Advances

Cash advances usually come with high fees and interest rates. They also don't have a grace period, meaning interest accrues immediately. Avoid using your credit card for cash advances unless it's an emergency.

6. Regularly Review Your Credit Card Statements

Regularly reviewing your statements can help you spot any mistakes or fraudulent charges, ensure you're not overspending, and confirm that you're earning your rewards. In the era of online shopping and automatic payments, it's easy to lose track of where your money is going. That's why reviewing your credit card statements thoroughly every month is crucial. Here's why:

∎ Track Your Spending

Regularly reviewing your statements can help you understand your spending patterns, which can be insightful when budgeting or cutting back on expenses. It can also help ensure you're not unknowingly paying for unwanted subscriptions or services.

Your statement will also show your credit limit and how much of it you're using. As mentioned earlier, keeping your credit utilization below 30% is recommended to maintain a good credit score.

Regularly reviewing your credit card statement is more than just a good financial habit. It's an active step towards better financial management, helping you understand your spending, save money, and stay secure. Remember, knowledge is power; in this case, it can lead to financial wellness.

∎ Ensure you are getting your Rewards

If your credit card comes with a rewards program, your statement is where you'll see the points or cash back you've earned. By reviewing it, you can ensure you're receiving the rewards you're entitled to, understand how you earned them, and plan to maximize them.

∎ Check Interest and Fees

Your statement will show the interest and fees you're being charged. Understanding these charges can be the first step if you aim to pay less interest or avoid certain fees.

∎ Spot Fraudulent Charges

Credit card fraud is a serious issue that can lead to financial loss and impact your credit score. By reviewing your statement, you can identify any unauthorized charges or suspicious activities on your account. If you spot anything unusual, immediately contact your credit card issuer to dispute the charges and secure your account.

∎ Identify Billing Mistakes

Mistakes can happen. A retailer might accidentally charge you twice for the same item, or there could be a mix-up with a return. These errors can easily go unnoticed if you're not regularly reviewing your statements.

Final Thoughts

Sometimes you might have to change how you use your card or opt for a better one to suit your requirements. The most viable option is to select a card to suit your present lifestyle. Credit cards can enhance your financial life when used with care and intelligence. By making your credit cards work more intelligently, you can enjoy the conveniences and benefits they offer without falling into debt. Remember, the goal is to control your credit cards, not let them control you. Happy, smart spending!

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