Smart and Silly Ways of Using Credit Cards

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smart ways to use credit cardsCredit Cards are now a strong part of our financial culture, and everyone has their opinions about them. Credit Cards have been abused by the majority of Americans, because it’s such easy credit. Almost anyone can get one, and it’s so easy to swipe the card at the register and forget about how much money you just spent. But in the right hands, they are useful and earn rewards for folks that use them correctly. Abuse them and you’ll get into real trouble. Below is a check list of silly and smart things you could do with your credit cards. Obviously, we want you to be smart about it and use it wisely.

Silly Ways To Abuse Credit Cards

Using the credit card at the ATM for cash advances – This is Silly #1 because if you use your credit card at an ATM for cash, you’re usually going to end up paying between 20-25% in interest. This means an advance of $200 will cost you $40 at the least. If you need cash that badly, you would almost be better off just getting a loan with a bank. Use your ATM card, never use your credit card. And if you are traveling abroad, use your ATM card too. You may have to pay a nominal fee, but it is much better than taking a cash advance from a credit card!

Forgetting to pay your bills on time – Late fees on credit cards can add up and can also result in other fees, like over-the-limit fees. Set your payment on automatic debit if you find that you can’t keep track of the due dates. It’ll save you quite a bit of money. Forget to pay by 60 days, and it gets reported to the credit bureaus, and you take a hit on your credit score.

Carry a balance – This may not seem like a silly way to use a credit card, but carrying a balance results in having to make interest payments and depending upon your credit card’s rate, this can result in you paying a whole lot more for your purchase. Remember that the rate that is stated APR is never the true effective rate. Because your rate is computed monthly but using a “daily average rate,” the interest you are paying is always higher than the quoted “APR”.

Paying only the Minimum Payments – Pay only the minimum payments, and it takes you forever to pay off (depending on what the minimum is). Plus, when you add up the interest, you end up paying double the original price you paid. Pay in cash or rather, pay in full every month. The new CARD Act requires issuers to include in your new credit card statement how long it will take to pay off your balances if you only paid the minimum payment and how much interest you would end up paying. You will not like what you see!

Using a credit card with no rewards – I know many folks who pay their bills fully every month. Yet, they have a credit card that pays no rewards. Almost all credit cards have a rewards program these days, and using a credit card that isn’t giving you something back is silly. Look for cash back credit cards or airline credit cards where you can earn points that can be redeemed for buying things.

Falling for teaser deals and store cards – Falling for teaser deals that are only temporary or are meant to lure you into getting the card is not smart. Usually, after the initial special, the card really isn’t worth having. This applies to store cards as well, that offer a one time percentage off for signing up but have a 20% interest rate.

Smart Ways to Take Advantage of Credit Cards

Pay your bills in full – Paying your bills in full and not carrying a balance means that you’re also not accruing and paying interest on your debt. Additionally, with rewards cards, you’re still earning points or miles when you make purchases and it’s not costing you anything.

Set up autopay – This is a tip that more and more cardholders are taking advantage of simply because of the ease of mind that autopay will give you. Set it up once and forget about it and never pay a late fee for missing the due date again.

Making use of rewards – Save your points and actually use them on things you’d like to purchase or were going to purchase anyway. This is like getting free stuff, only you’re using the rewards you’ve earned for being a cardholder. If there is a certain shopping portal with your credit card company, make sure you are aware of the merchants and retail shops that it offers, and use your card to shop there to make sure you receive the maximum rewards possible. For example, Discover Card has a great shopping portal that gives you 5% to 20% rebates!

Make use of extended warranty feature – Some of the better credit cards have extended warranty features where they will extend the manufacturers’ warranty for up to an additional year if you use the card to pay for the purchase. Make use of it if your product ever breaks down after the manufacturer’s warranty expires but is still within the credit card issuer’s extended warranty period. This will save you money from buying more “extended warranties”.

Using auto collision insurance – Most credit cards these days insure you in the event of a collision on a car you rent if you pay with your credit card. That will actually save you quite a bit of money from paying the extra auto collision insurance if you were to pay for it yourself.

Accidental Loss and Damage Insurance – The better credit cards have this feature where they will reimburse you if the product you bought with the credit card gets lost or is accidentally damaged and the store refuses to take it back. There is obviously a limit as to how much you can claim in one year. But this feature can really come in handy.

Using 0% APR deals to reduce debt – If you happen to get into credit card debt and wish to pay it down sooner, then getting a 0% balance transfer credit card is one savvy way to reduce interest costs and get started on a “snowball tactic” to pay off your debt faster. You’ll save a significant amount of money transfer balances by moving from high interest cards to a card with an introductory 0% APR. Some cards offer this from 6 to 12 months, which is a pretty significant amount of time to save money on interest.

Ending Thoughts – These are just a few tips used to point out the differences between being silly with your credit cards and being smart. Strive to be one of the cardholders that is smart with their credit, and you’ll avoid a lot of financial issues in the future.

This post is from Mr Credit Card of The goal of the website is to educate people about the various credit cards available. The site provides reviews of various cards in an effort to help people make informed choices. If you are looking for a brand new card, check out his best credit card deals section.

Categories: Credit and Debt, Spending and Saving

  • ctreit

    Two more good uses of credit cards:

    It is easy to buy things on the internet.

    You don’t need to carry cash.

  • Em D.

    Forgetting to pay my credit card bill is the one I try the hardest to avoid. It’s only happened once or twice but I’m still angry with myself for letting it happen. My dad is the king of reward cards- specifically air mile rewards. I sort of see it as one of his hobbies. He’s great at figuring out which card has the best rewards and how to maximize those rewards. Our whole family has benefited by receiving multiple free airline tickets a year- definitely a hobby I encourage him to continue pursuing :)

  • Gina

    0% APR sounds good on paper, but you could be playing with fire if you lose your job–all of a sudden you have lost your income to pay this debt off, and before you know it the 0% runs out, and you are paying a very high rate!

  • Mac

    I nearly avoided all the “silly” ways of using a credit, but failed at the last one. I do have some store cards, but really, it’s not THAT silly. I go to Menards very often for home improvement products and I get 2% back off everything I buy there in a credit check each year. They also provide some good coupons each month with your statement. Other store cards allow you 12-months no-interest on large purchases…like my Home Depot & Best Buy cards. The key is, you NEED to pay them off BEFORE the promotion is up.

  • Olivia

    We avoided the interest thing when traveling abroad. Just prepay the credit card to cover spending money, then take it out as needed. You tend to get the best exchange rates through a bank and ATM’s are fairly available. It’s much easier and cheaper than trying to use traveler’s checks or getting the local currency here in the states.

  • David/Yourfinances101

    Another smart way to use a card—open one up with a 0% APR offer, with a balance transfer option with no fees. Take it all in cash. Invest it. Pay it off before any fees hit.

    Its free money, plain and simple.

    • Mac

      I’ve never heard of a balance transfer with no fees. Though there are many that that have 0% for 6-12 months, usually they charge you a certain percentage between 3 and 6% for each transfer. If you know of any cards with no fee, I’d sure like to know.

  • Shock

    Bank of America has a great shopping portal. It’s called Add It Up and you can use your BofA credit or debit card to get the retail discounts. At Christmas time I got 10% cash back on top of a sale price.