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How to Use a Credit Card & Rewards Wisely – 6 Tricks to Outsmart Credit Card Companies

People have become more and more displeased with their banks. High interest rates, credit card fees, and poor customer service have left them clamoring for change and better treatment. The Credit CARD Act of 2009 is a step in the right direction, but it’s not an all-encompassing fix.

Luckily, some people have found ways to outsmart their credit card issuers and make the system, flaws and all, work for them. Here are some of the tricks they use.

1. Never Carry a Balance

This is the holy grail of credit card use tactics. As long as you pay your balance on time and in full every month, you will never pay a dime in interest or fees.

Tip: Register online for instant access to current account information. Log in frequently to ensure you’re not spending more than you can afford, and pay in full when your statement comes due. Set up an automatic payment plan to ensure you never miss a deadline.

2. Keep a Clean Card

Let’s say you’re unable to pay your balance in full every month, but you are steadily reducing your total debt. You’d like to be able to take advantage of the perks credit cards have to offer, but you don’t want to increase your debt load.

If you only have one card begin and are already in debt, focus on paying that card off before opening any new accounts. If you have more than one credit card, there is a way to continue paying down your existing debt without incurring interest on new purchases.

The key is to keep one card “clean” by paying its balance in full every month. As long as you pay the balance of the clean card in full every month, you can use it without worrying about incurring interest on your purchases. Just make sure you never spend more on the clean card than you can easily pay for in full, and pay more than the minimum on your cards that carry a balance to keep reducing your debt load.

Tip: Don’t make non-essential purchases while you’re still in credit card debt. If you’re not disciplined enough to limit what you spend when paying with a credit card, the best solution is to pay for everything in cash or with a debit card while you’re paying off your debt.

3. Know Your Statement Closing Date

If you pay your balance in full every month, you’re essentially getting a free loan from your bank from the time of purchase to the due date for that payment cycle. Federal law now requires that banks offer a 21-day grace period between the date your statement closes and the date your bill is due.

As a result, if you make a purchase a day before your cycle closing date, you’ll have 21 days to pay for it before incurring interest. Complete a transaction the day after the cycle closes, and you’ll have an additional month until the next cycle closes, plus another 21 days, to pay off your balance.

Tip: Hold off on major purchases as you approach the end of your statement cycle. By delaying your spending just a few days, you can gain an additional month of time until your payment is due.

4. Use the Right Card When Traveling Internationally

I use my Chase Freedom Unlimited credit card all over the U.S. because the cash back I earn when making a purchase are valuable to me. But when I leave the country, that card stays tucked deep inside my wallet and I use my Capital One Quicksilver Cash Rewards credit card instead.

Why? My Chase card charges a 3% foreign transaction fee, which negates all the value of my rewards. Capital One is one of the few cards that doesn’t charge any foreign transaction fees. Thankfully, consumers are learning these fees are a ripoff and, like me, are refusing to use them when traveling. Due to this growing customer dissatisfaction, it looks like Chase and other companies are getting the message.

Recently, American Express announced they would drop these fees, but only on their Platinum and Centurion cards. Citigroup also announced they would eliminate these fees on a number of their cards. Choose a fee-free card on your travels and deny your credit card company the opportunity to take your money.

Tip: When planning a trip outside the United States, contact your credit card companies and ask them what their foreign transaction fees are. It’s also wise to inform them where and when you’ll be traveling so they don’t suspect you’re a victim of credit card fraud.

5. Take Advantage of Sign-Up Bonuses

Big spenders earn plenty of rewards each month, but the rest of us have to be more creative. Credit card gurus have learned two simple lessons from the economic troubles of the last few years:

  1. Some Airlines Are Desperate. Troubled airlines become so desperate, they’re willing to sell frequent flier miles by the millions to banks for cold hard cash, creating additional rewards for consumers.
  2. There Are Some Amazing Sign-Up Bonuses Out There. Banks are so anxious to find new customers with good credit that they sometimes dole out unprecedented sign-up bonuses to attract them. For example, one bank recently offered 75,000 miles on American Airlines to sign up for a credit card.

The result has been a bonanza for cardholders with good credit who can wait patiently for the best deals. And because it reduces your credit score if you frequently open up new accounts, savvy consumers know not to hold out for these deals.

Tip: Don’t accept that cashier’s offer to save 10% on a smaller purchase when you open a retail store credit card. Apply for cards sparingly, and apply only for the cards with exceptional sign-up bonuses, to maintain your credit rating.

6. Be Smart About Switching Cards

If you want to get a new cable TV or Internet service provider, you’re lucky if you have more than one or two companies to choose from. But if you want to change credit cards, you have hundreds of different options available to you. Even customers with subpar credit scores can find their mailboxes full of credit card solicitations.

As tempting as these offers might be, you don’t want to change credit cards like you change socks. Too much of this activity can hurt your credit score and make it difficult to track your spending.

That said, sometimes a change is necessary, whether it be for better customer service, better rates, or better card perks. If your credit card issuer fails to meet your needs for any reason, don’t hesitate to end the relationship and move on.

Tip: When you shift your spending to a different card, try to keep your dormant account open until the annual fee (if any) is due. It will maximize the average length of your credit history, and in turn, improve your credit score.

Final Word

Like any other business, credit card companies are out to make money. Unfortunately, their tactics often involve creating rules that take advantage of consumers.

So don’t use your cards blindly. Learn about additional fees you may incur, and pay your balance off each month to avoid interest. Take advantage of any perks you can to be sure your credit cards are acting as the valuable financial tools they should be.

What are some ways you’ve found to outsmart the credit card companies? Share your tips and tricks in the comments below!

Jason Steele is one of the nation's leading experts in credit cards and travel rewards since 2008. Jason is also the founder and producer of CardCon, which is The Conference for Credit Card Media. Jason lives in Denver, Colorado where he enjoys bicycling, snowboarding and piloting small airplanes.