How to Use Credit Cards Wisely and Earn Rewards

November 1st, 2021

Let's be honest, credit cards can feel a little intimidating. They can seem like a quick way to spend more money than you actually have, leading to debt and stress. But when used wisely, they can be a fantastic tool for building credit and earning some serious rewards! This isn’t about reckless spending; it’s about intelligent utilization.

1. Understand the Basics – Interest Rates and Fees

Before you even think about rewards, you need to understand the terms of your credit card. Pay close attention to:

APR (Annual Percentage Rate): This is the interest rate you’ll be charged if you don't pay your balance in full each month. Aim for the lowest APR possible!
Annual Fee: Some cards charge an annual fee. Make sure the rewards you’ll earn outweigh the fee.
Late Payment Fees: These can be hefty and quickly erode any rewards you've earned.

2. Choose the Right Card for You

There’s a credit card out there for almost everyone. Here's a breakdown of some popular types:

Cash Back Cards: These are great for everyday spending, offering a percentage back on purchases.
Travel Rewards Cards: Perfect if you frequently travel and want to earn points or miles towards flights and hotels.
0% APR Cards: Excellent for financing large purchases, but always pay off the balance within the introductory period.
Store Cards: Often offer discounts at the specific store, but make sure the interest rates aren't excessively high.

3. Make a Budget and Stick To It

This is the most important step. Don't let the allure of rewards tempt you to overspend. Track your expenses and create a budget to ensure you're only spending money you've already earned.

4. Pay Your Balance in Full Every Month

Seriously, do this. Paying your balance in full avoids interest charges and maximizes the benefits of your rewards program. If you can’t pay the full balance, consider the 0% APR card option – but understand the timeframe.

5. Maximize Your Rewards

Sign-Up Bonuses: Many cards offer a large bonus for meeting a spending threshold within a specific timeframe.
Category Bonuses: Some cards offer higher rewards rates on specific categories like groceries, gas, or dining.
Don't Forget to Redeem: Regularly check your rewards balance and understand how to redeem your points or miles.

6. Monitor Your Credit Report

Regularly check your credit report to ensure your information is accurate and that there are no unauthorized charges. You can get a free copy of your credit report from AnnualCreditReport.com.

Final Thoughts:

Credit cards can be a powerful tool for financial success, but they require discipline and smart planning. By following these tips, you can earn valuable rewards while building a strong credit history. Happy spending (responsibly!)