Making a credit card work to your advantage requires a bit of strategizing. If you’re still having trouble staying out of the red or you’re not getting a positive return on your rewards card, here are a few questions you should ask yourself before charging a new purchase to your credit card.
Will this purchase force me to carry a balance?
Generally speaking, you want to pay off your credit card bill in full each month to avoid incurring interest. Not only will the additional dollars render rewards points moot, but they can quickly accumulate and lead to major debt woes. If a purchase is putting your budget at a tipping point, hold off on making the charge until your bank account has recovered. To keep balances from unconsciously climbing sky-high, pay off purchases as you make them using a linked debit card account.
Would I buy this anyway?
Cautious consumers don’t view credit cards as a way to purchase items they can’t afford. To avoid spending beyond your means, ask yourself if you would buy the item if you didn’t have the option of carrying a balance. Asking this question can also help you avoid spending just to earn rewards either through the card’s base program or in an attempt to earn a sign-on bonus you wouldn’t typically qualify for.
Is there a better card to use?
Certain cards may offer better rewards in a particular product category so if you have multiple cards in your payment arsenal, you may want to consider which one nets the best return before you go ahead and swipe. If you do run into an instance where you have to charge a big-ticket item you won’t be able to pay off in full, you may not want to put in on your go-to rewards card. APRs on these cards tend to be a bit high to fund the points, miles or cash back associated with them. Instead, opt for the card in your wallet that carries the lowest interest rate, then focus on paying down the balance as quickly as possible.
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