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If you aren’t careful with your spending, credit cards can be an issue, but if you use them properly and watch your spending, credit cards can actually be a great financial tool to help you save money. The key to a credit card is paying off your entire balance each month, that way you aren’t charged any interest or late fees. If you choose a card with no annual fee, that means you aren’t paying the credit card company anything and can reap the rewards of the credit card for free. Here are a couple ways that credit cards can help earn you extra money:
Make sure you are making the most of your cash back or travel rewards. You should have a general purpose credit card and a credit card with revolving reward categories. General purpose rewards credit cards have a flat rewards rate (the best offer 2%), so you earn the same amount of rewards on everything you buy. You can use this card for any purchases that won’t earn you more with your revolving rewards credit card.
Revolving rewards category credit cards offer higher reward rates (up to 6%) on revolving categories like grocery stores, movie theaters or gas stations. The key with these cards is knowing which categories you get rewards on. So if the end of the year categories are online purchases, make sure you are using the card for all your online shopping to reap the most rewards.
If you want to make a big purchase, look for a 0% intro APR credit card to put it on. A 0% intro APR credit card means that you won’t have to pay interest on your balance for a certain amount of time (usually a year to a year and a half), so you will have time to pay down the balance slowly without being charged interest. You should use the card even if you have the money to pay for the item; keep that money in your savings account and rack up interest while you pay off the purchase slowly.
If you aren’t in over your head in credit card debt, you should not be paying any interest on your balance. People with good or excellent credit can apply for a balance transfer credit card. Look for a credit card that offers a 0% intro APR on balance transfers. You won’t pay interest on your balance for a year and a half, given you the chance to pay down the balance more quickly.
Most rewards credit cards require good or even excellent credit to qualify, but even if you have average credit, there are still rewards credit cards that you can qualify for.