Responsible Use of Credit Cards Personal finance gurus work hard to discourage us from using credit cards, and for good reason. Many of us use credit cards recklessly, which leads to debt.
Contrary to popular assumption, if you can handle plastic responsibly, you're much better off paying with a credit card than a debit card and limiting cash transactions. Let's look at why your trusted credit card wins out, as well as specific credit card uses and techniques to employ.1. One-time bonuses. There's nothing like an initial bonus chance when applying for a new credit card.
Applicants with strong or exceptional credit can frequently be approved for credit cards that provide bonuses of $150 or more (sometimes considerably more) in exchange for spending a particular amount (anything from $500 to several thousand dollars) during the first few months of the account's opening.Other cards entice applicants with bonus reward points or miles that can be redeemed for travel, gift cards, merchandise, statement credits, or checks (details below). In contrast, a regular debit card that comes with a bank checking account typically provides no initial incentive or continuous opportunity to earn rewards.
2. Cash Back. Discover introduced the cash-back credit card to the United States, and the concept was straightforward: use the card and receive 1% of your expenditures back in cash. Today, the concept has developed and matured. Some cards now provide 2%, 3%, or even 6% cash back on select purchases, albeit such tempting offers are subject to quarterly or annual spending limits.
1The best cash-back cards have low fees and interest while providing a high rewards rate.3. Reward Points Credit cards are designed so that cardholders receive one or more points for every dollar spent. Many reward credit cards offer bonus points for certain areas of spending, such as restaurants, grocery, and gas.
When specific earnings thresholds are met, points can be redeemed for travel, gift cards from merchants and restaurants, or products via the credit card company's online rewards system.Your credit card rewards options are practically limitless. Get a co-branded card offered in collaboration with a hotel chain, apparel retailer, or even a charitable organization like AARP, and you may use your ordinary spending to earn valuable benefits day after day.
3The idea is to choose a card that best matches your spending habits. The inverse—changing your spending habits to accommodate a specific card—can be unproductive. However, if you already spend money with a specific merchant or have a preference for a particular hotel, why not use the card that will encourage your continuing patronage by providing you with additional points, discounts, and perks.
4. Frequent Flyer Miles This benefit predates nearly all of the others. In the early 1980s, American Airlines formed a relationship with credit card giant Citibank to provide customers with an innovative way to earn frequent-flyer miles even when they were not flying.
4 5Now, all domestic and foreign airlines offer at least one credit card through a similar relationship with major credit card issuers.Cardholders typically earn miles at a rate of one mile per dollar in net purchases, or sometimes one mile every two dollars spent on lower-end cards with no annual fee.
The value of this incentive varies according to the type of airline ticket purchased with your points or miles. The mileage-based launch benefits on many frequent flyer cards increase their value significantly. These are frequently enough to get you 50-100% of the way to an award flight after fulfilling the card's initial spending threshold.
Source: Investopedia.com