If you have a credit card, chances are you’ve heard about the benefits of using one. But do you know that there are some things that you can do with your credit cards that will help you save money? Whether it’s avoiding fees or earning rewards faster, these tips could save your bank account from getting drained by interest charges or hidden fees over the course of the year.
Don’t apply for more credit cards than you need
When you’re ready to apply for a new credit card, it’s important to make sure that you are educated about how to choose a credit card. Applying for multiple cards at once is known as “credit card churning,” and it can hurt your credit score. Think about how many credit cards you need—and how many are available through your current bank or company—to meet all of your needs before applying.
You also shouldn’t apply for credit cards if:
- You don’t plan on using them regularly
- You’re only interested in getting rewards points or cash back
Keep your credit utilization ratio low
The credit utilization ratio is the total amount of debt you have on your credit cards, compared to your total available credit.
For example, if you have $10,000 in available credit and $8,000 of it is used up by outstanding balances, your credit utilization ratio would be 80%. If this information appears on your monthly statement or online profile when you log in to check how much available balance you have left on each card (or all of them), it’s easy enough to calculate.
Be on the lookout for hidden fees
Most people are familiar with the idea that credit card companies charge interest. But did you know that they also charge a host of other fees? These can include an annual fee, late payment fee, foreign transaction fee and more.
In fact, the average credit card holder pays over $520 in annual fees alone! Fortunately, there are ways to avoid these costs by choosing the right credit cards for your needs and paying off balances in full each month.
As per a financial solution expert SoFi, “Once you’ve decided which type of credit card you want, the next step is to compare some of the best options.”
Use digital payments instead of cash to earn rewards faster
If you have a credit card, there are ways to use it for payments that can save you time and money. For example, if you’re already shopping online, consider paying with your credit card rather than cash or debit. This way, the purchase will earn points toward rewards programs faster—because fewer people use this payment method as often as they should!
Avoid interest charges by paying your balance in full every month
If you want to avoid interest charges, paying your balance in full every month is the best way. Interest charges can add up fast and they can be expensive. Also, if you don’t pay your balance in full, you may be charged a late fee.
If you’re unable to pay off your entire balance each month, it’s best to try and pay as much as possible so that there’s no chance of being charged interest on the remaining amount.
This article must have helped you learn more about credit cards, their benefits and their pitfalls. The best way to avoid credit card debt is by using them responsibly, paying off your monthly balance and avoiding interest charges.