Credit cards: Shopping smarter, not harder! Find out which credit card to use for every purchase, and learn about special financing options.
Credit cards can be tricky. If used irresponsibly, they can wreak havoc on your finances. However, when used strategically, credit cards can actually save you money and earn you perks.
As an ex-banker, I’ve compiled the five most strategic credit card hacks designed to help you get the best possible value while avoiding any costly mistakes.
Pay off your balance in full each month.
This avoids paying interest, which can quickly accumulate and become costly debt. Additionally, paying your balance off fully shows lenders you can responsibly manage credit and helps maintain an optimal credit score.
To make sure your payments are always on time, set up autopay through your card issuer. Setting up automated payments takes the guesswork out of due dates and protects your credit by ensuring you never miss a payment due to forgetfulness.
Earn sign-up bonuses.
Credit card companies often offer extremely generous rewards and cash back when you spend a certain amount during the first 3 months the account is open. This is essentially free money that card issuers give you to incentivize signing up.
Take advantage of these signup bonus offers by spending up to the minimum spending requirement within the promotional period. Be sure to only spend what you normally would and what you can pay off in full.
When used responsibly by paying off your balance each month, earning signup bonuses allows you to maximize perks without accruing interest fees. Just be aware of any annual fees that may apply after the first year.
Use the right card for the purchase.
Make sure to use cards that earn the most cash back, points, or other rewards for that particular spending category. For example, you may have one card that offers 3% cash back on groceries and another that offers 5% on gas. Always pay attention to bonus category rules to maximize earnings.
Also be on the lookout for special financing promotions that banks offer periodically. For instance, some major banks like Metrobank and BDO provide “Buy Now, Pay Later” options that allow you to defer payment on a large purchase for 6-12 months without accruing interest.
When cash ran low during our home construction, while waiting for the bank loan, I strategically used a Buy Now, Pay Later promotion on my credit card. This deferred financing option bought me time to budget for the amortized payments once the loan proceeds was released.
Additionally, deferred interest financing promotions can permit large, important purchases without immediately hurting your cash flow. However, you must be diligent about paying off the entire promotional balance before the 0%-interest period expires.
Otherwise, you may face retroactive interest charges on the original purchase amount. Carefully read all terms and dates to avoid this costly pitfall when using deferred financing deals.
Avoid cash advances.
Avoid cash advances unless absolutely necessary. Cash advance fees are often exorbitantly high, with both a transaction fee and a high interest rate.
Unlike normal purchases, interest starts accruing immediately with cash advances, even during the grace period. This means cash advances begin racking up interest fees right away.
Only use a credit card cash advance in true financial emergencies when no lower cost options are available. Even then, withdraw only a minimal amount to cover your urgent need. Cash advances should be an absolute last resort because they can rapidly become extremely expensive debt obligations.
If you take a cash advance, your top priority should be paying it back as soon as reasonably possible before the interest costs snowball out of control.
Set up account alerts and notifications.
Most credit card providers allow you to configure alerts for various account activity, including suspicious charges, low balance warnings, payment due date reminders, and more.
Taking advantage of these alerts helps protect against credit card fraud by notifying you of any unauthorized charges. Alerts also help avoid late fees by ensuring you never miss a payment due date.
Other useful alerts include charges over a certain amount, international transactions, and balance transfers. Enable as many alerts as possible to closely monitor your account activity and catch problems proactively before they escalate.
Treat alerts as your first line of defense against both fraud and accidental oversights that lead to fees.
Get superior value from your cards.
The smartest credit card users leverage bonuses, perks, promotions, and features to get superior value from their cards. Apply the tips and hacks above to take full advantage of the unique benefits each of your cards offer.
Always stay cognizant of expiration dates, changing terms, and new offerings so you can adapt your spending habits accordingly. Get into the habit of monitoring your credit activity and diligently managing your accounts. With proper usage, credit cards can be instrumental money-saving and financing tools rather than debt traps.
Stay strategically informed to maximize perks and points while minimizing fees and interest. Proper credit card management takes some time and effort, but doing so will allow you to unlock the full potential and value of your cards.