Credit cards are plagued with a negative reputation. The media frequently discusses the harmful aspects of using them. Traditionally that is carrying balances, missing payments and increasing interest rates. However, there are plenty of positive reasons to use credit cards. And with proper usage, credit cards can be a part of your frugal lifestyle.
Using credit cards effectively to save money takes attention to detail and diligence. Below are four ways to use credit cards to your advantage.
You've seen the commercials on television. Credit cards with reward programs are all over the place. You can accumulate air miles, gift cards, gadgets, roadside assistance and more. These rewards can save you money during vacations, holidays and for gift giving. There are limitations to those rewards, it's imperative that you read the fine print, just one missed payment can ruin a reward benefit.
- Cash Back
A number of credit cards offer cash back based on the amount of money you spend. Capital One, Citibank, Discover and American Express are among those cards offering cash back. Some will offer a percentage of your quarterly or yearly spending, typically 1-5% and even 20% with one Discover card. While other cards offer a dollar amount for every $100 spent or a specific amount once you have reached a predetermined amount spent. Additionally, there are credit cards offering a referral bonus when have a friend sign up for the card.
- Maintaining Interest Rates
Nothing ruins frugality like wasting money and nothing wastes money more than an increasing interest rate. Missing a payment or being late, even by one day can affect your interest rate. While missing a payment causes you to pay interest, thereby wasting money, an increased interest rate can affect any rewards or benefits you may have. Paying attention to your credit card interest rates is crucial for maintaining a frugal relationship with them.
- Willingness to Change
Credit cards are notorious for changing their reward programs. They're hoping that users will continue to use their card even after programs change. As a frugal person, you can not let that happen. You must be willing to change credit cards when either a better program comes along or your current credit card changes their beneficial rewards program.
Frugality and credit cards can exist in the same financial plan. The key is to maintain knowledge about the credit cards and their regulations. Doing so while also using the card properly will ensure your success.
This article was written by the Debt Princess. Check out her blog at The Debt Princess where she offers “lessons in what not to do”.