What Are the Best Ways to Use Credit Cards?

Topics: Reading time: 4 minutes

Did you know there’s a “right” and a “wrong” way to use credit cards? It’s true, and too many people find themselves relying on credit cards for the “wrong” things. When you use credit cards to pay for things you can’t afford, you find yourself trapped in the cycle of high-interest rates and endless repayment. Though it’s possible to consolidate your debt or use another debt solution, it’s much easier when you know the “right” ways to use credit cards. 

It is wise to remember that the money you use via your credit card is not your own. Essentially, it’s an unsecured loan from your financial institution, and it comes with a high interest attached. Though it might feel like a card full of endless money, it’s important to keep things in perspective. 

Credit cards easily get a bad reputation when they’re not used responsibly, but they can be put to good use with the right know-how. In this guide, we’ll answer the big question: what are the best ways to use credit cards?

1. Build Your Credit History

In our society, your credit rating carries a lot of meaning. When you use your credit card wisely and pay it off on time, it builds your credit history. When you need a bank loan for a home or car, the lender can see at a glance that you are a good risk and that is likely to qualify for a much lower interest rate on the loan. This can potentially save you thousands of dollars when you realise that the interest you pay on any loan will compound over time.

In addition, being able to get a loan quickly due to your good credit rating may be the difference between getting the home of your dreams before someone else gets it. This can save you paying rent while waiting for the home you want. Because your credit is so important, it’s a good idea to use your credit card to build your credit responsibly. 

2. Overseas Travel

When you’re travelling internationally, you might not be able to spend money in the same way you do at home. A credit card is a good way to pay for things while overseas. It saves you from carrying cash that could potentially be stolen or lost. 

In addition, some credit cards offer travel advantages of various kinds that can save you a great deal. You might not have to pay conversion fees when converting money overseas, and this could mean saving time and money. Most airlines reward cardholders with some sort of points scheme that in the long run may be redeemable for free flights and discounted accommodation.

3. Everyday Rewards

Many credit cards offer rewards for everyday use. This may include rewards for frequent purchases like your fuel, phone bills, and groceries. People use their credit card to replace their everyday savings accounts in order to accrue certain points or minimum spends to receive rewards, even though they can afford not to have a credit card. 

However, it’s riskier to use your credit card for everyday purchases. When you receive your monthly statement, try to pay off the balance in full so that you don’t get charged with high credit card interest rates. If you’re not able to pay it off in full, they make sure you use the credit card as little as possible because the points gained from using the credit card will never be worth more than the interest charged by an outstanding balance.

4. Fraud Protection

When you use a credit card, it protects you against fraud or being overcharged. If you have been overcharged, having the credit card company take up the dispute on your behalf is far more likely to gain a good result than if you did it yourself – and it is far less stressful.

You can use your credit card receipts to check against your bank statements and may catch any mistakes that have been made by the bank. This happens more than most people think. Getting it resolved in time can prevent a black mark against your credit history and save you money.

If your savings card is stolen, you run the risk of losing your important funds. On the other hand, if your credit card is stolen and used, you won’t be on the hook for this money spent. Banks have their own fraud department to fight these scammers, so you won’t have to worry about your money being taken. 

5. Online Purchases

Lastly, using your credit card online makes things a lot easier. Unlike your local businesses in your community, you’re more likely to encounter untrustworthy sellers online. Whenever you purchase something through a website or app, a credit card keeps your funds more secure. 

Again, if something goes wrong with your purchase, you’ll have your credit card company on your side. They can help you fight for refunds, stolen product or funds, and they keep your identity secure. 

6. Debt Consolidation

If you have a range of different debts and have to pay them all off at different times, it can be very confusing to know what steps to take forward. One common option is debt consolidation with a low-interest rate credit card

When you consolidate debt in this way, you can save on the overall interest as you have the one debt to pay off. You’ll also go from several payments to one, making it easier to stay on track with your financial goals.

A Word of Caution About Credit Cards

While a credit card can be a great tool that keeps you safe and builds your credit rating, they are always risky to some extent. Like cash, you need to use credit cards responsibly. It is essential to read the fine print when applying for any kind of credit card. 

By reading the fine print, you will also find out all about the good deals they offer, rewards for certain actions, or certain intro bonuses. If you want to buy something that is more expensive than usual, it is a good idea to get a new credit card to do it with as you can often get a discount of $100 or so. Every little bit saved helps.

Once you know all the finer details, you’ll be ready to make the right choice. Remember, credit cards should be used responsibly, not just to drive up your debt.

Making the Most of Your Credit Cards

While credit cards are often demonized in the savings world, they’re not all bad. If you use your credit card for any of the above, you’re on the right track. The whole idea of using a credit card is to help make your life easier and more convenient. In reality, credit cards have the potential to do more harm than good. Responsibility is key. 

For more expert advice, we’re here to help! Contact us today to get professional debt consolidation advice so that you know for sure that you are doing the right thing.

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