Regular readers know that I am wary of plastic and usually go around telling people (and readers) to eschew buying stuff on credit. While I stick to my position and reiterate that credit cards are just a way for financial institutions to make money, they can be quite useful if used the right way.
Very often, credit cards are just too convenient to avoid especially now during the shopping holiday season – for instance there is a really good deal you’re getting but you don’t have ready cash at that very time. And I have to grudgingly admit; credit cards can also mean savings in some cases. So here’s what you can do to get the best out of your credit card:
- Credit card companies offer many blandishments to lure you into using plastic. Find out about and utilize reward points, frequent flyer miles, sign up bonuses, and cash-backs that are offered by your credit card company. Sign up bonuses can offer between $50 and $250 and you can get between 1 and 5% cash back on purchases.
- Read the fine print. Are there monthly charges, processing or recurring fees? What are the penalties if you fail to pay on time? If you feel you don’t need your credit card anymore, are there any financial penalties for canceling it? Find out about these and avoid nasty surprises.
- Exercise control. Never use the credit card for impulse purchases and always make sure that what you’re buying is necessary. Even more importantly, buy only that which you can afford to pay for when the credit card bill arrives.
- Always pay up on time; don’t let them con you out of any of your hard earned money in usurious interest. By all means take advantage of the grace period, but don’t be late in paying and don’t give them the satisfaction of making you pay more than you owe.
- Find out about insurance benefits. Many cards offer free insurance – there could be product warranties, travel insurance, health insurance or car rental insurance built into your credit card. Find out about this; it could mean significant savings.
- When the safety of your belongings and portability are an issue; such as when traveling, credit cards can be a real boon. If you don’t know when and how much cash you may have to fork out, or when you cannot or don’t want to carry too much cash along (as in when you’re traveling) carry plastic instead.