Playing the credit card game? Are they traps or tools?
I’ve been there before and I imagine if you own a credit card you’ve been there too. Here’s what happens, you get your credit card statement in the mail and to your surprise (usually after the holidays or vacation) you find the finance charges are almost equal to the minimum payment you are required to make.
Here comes the frustration and as it sets in you come to the realization that if you make the minimum payment you may never pay off your debt. That’s exactly what the credit card companies want you to think. They want you to give up and lose the credit card game.
Now is the time to change and turn the credit card game in your favor. For decades, credit card companies have been preying on consumers and taking advantage of them. It’s time to learn how to take advantage of the tools they offer and become one of the few who profit and benefit from using a credit card.
Credit cards have great tools to offer the savvy consumer. Let’s take a look at how to use things like online payment programs, cash back programs, balance transfer programs, and other rewards programs for you to benefit from. Be careful with these because they can also be the trap.
Balance Transfer to get a lower rate.
If you have a card with a balance, the first order of business is to make sure you have the lowest rate possible. Most credit card companies play the credit card game when they offer an introductory rate or even a very low fixed balance transfer rate. If you already have a card with a zero balance check to see if a balance transfer is available.
Careful though, if you want to win the credit card game, never transfer a balance to a card that already has a balance. Most credit card companies apply your payment to the balance transfer part of the balance first, leaving the higher interest bearing charges to continue to accrue and compound at the higher rate, sometimes over 20%! If you do not already have a card available you can find a great balance transfer offer at smartbalancetransfers.com.
Man vs machine, set up automatic payments
Once you have your balance at a reasonable rate you should set up an automatic payment to make sure you always keep current. One of the biggest money makers for credit card companies is the late charge. It can be as high as $39 each month. This is huge for card companies. Imagine, a credit card company can easily have 10 million customers. If 10% of those made a late payment each month that would be $39 million that the card company earns each month. Anyway, you get the idea, the credit card company will definitely get their money not to mention they will not hesitate you raise your rate as fast as they can.
Trust me, I have personal some experience with this one and I was only a week late. It wasn’t even long enough to affect my credit, but the card issuer raised my rate to 24.9%. Luckily, I was able to immediately transfer the balance to another card at 3.9%. Lesson learned! Always set up an automatic payment, it’s like putting another player on your team to help you win the credit card game.
Most companies will let you set up a payment online and you can schedule your monthly payment to happen automatically. If you carry a balance, at least set up the minimum payment, but if you can the entire balance each month do it! Either way, you will avoid the late charge and the costly penalties that come with it.
Saving is earning, the highest Guaranteed rate of return you’ll ever have
Think of it this way, is there any investment you can think of that will give you a guaranteed rate of return? I can only think of a few, CDs at banks, maybe an annuity (but at a high price), or maybe some government bonds. Do you think any of those will pay as high a rate as you are paying on your credit card?
The average rate most people pay is somewhere between 12 and 15 percent. If you pay down your balance you are guaranteeing your rate of that 12 to 15 percent. It’s money that you just lose if you try and save it somewhere else without taking a lot of risk. Each time you make an additional payment on the principal you are putting that 15% back into your pocket.
Show me the money!
Who says you can’t have your cake and eat it too? After mastering the basics of credit cards it time to maximize the benefits. It’s almost unheard of to have a credit card that does not offer some type of reward. American Express and Discover are famous for their cash back rewards. Citi and Chase have excellent point systems to earn gift cards, travel vouchers, electronics and almost anything else you may want. There are also rewards cards to help you earn benefits for specific brand like the visa Disney credit card.
Which ones are best for you? Well, like with most things the answer is it depends. If you travel extensively, you would probably want one that pays extra points or rewards for airlines and hotels. If you spend a lot of time driving you would want to get a card that pays extra rewards for buying gas. If you look around you can find cards that even give extra rewards for shopping at grocery stores. Play your cards right and you’ll be winning the credit card game in no time.
More great credit card articles on NottaLotta®
- Negotiate a Lower Credit Card Interest Rate In 5 Simple Steps
- I’m get a bunch of points this month!
- Southwest Credit Card Member Perks