In order for credit card companies to draw in large amounts of people, they usually will offer some sort of rewards program when signing up. This can be anything from discounts on products for certain websites, airplane miles or even straight up cash back. While there are many different types of cards with programs that might be beneficial, ultimately choosing a card that is best for you is how you end up using it in the end. Im here to talk about how , if you make a smart decision and use a credit card to pay for items you were already going to purchase, you can end up ahead in the long run.
First you want to find a card with a program that is right for you. I personally use Amazon to purchase many things I need on a day to day basis, so with their card I earn about 5% on many of Amazon’s products, 2% for restaurants, gas stations and drugstores. Also I just straight up get 1% back on everything else that I pay for. This card has no annual fee which is good for me, but it is extremely important I stay on top of payments because at an interest rate of 22% it is basically like borrowing from a loan shark. You can have more than one card, but it complicated things unless you are doing a ton of spending, so until you get a hang of one card, I would say just choose which one works best for you. I would recommend using a site like nerdwallet (https://www.nerdwallet.com/rewards-credit-cards) to compare cards.
The reason that the credit card companies offer these programs is not because they are nice, its because ultimately they are betting you will fall behind on payments and end up in the trap most people do. With interest rates close to 20%, falling behind on payments will very quickly start to compound and no amount of cash back will be worth it. This is the most important part of the article! ALWAYS MAKE SURE YOU HAVE THE MONEY WHEN MAKING A PURCHASE ON YOUR CREDIT CARD. If you want to actually come out ahead and not fall into the trap many have before you, make sure that you can afford everything that you buy. Do not buy something that you are going to have to make payments on. The benefit over using a debit card is the reward dollars and if you pay interest it will negate those gains.
If you do choose to use more than one card, make sure you sign up for certain sites that help you track payments and make the process much easier. Credit card payments might not actually show up on the card for a few days, so you don’t want to forget when the payment is due and ideally you should pay immediately. I recommend mint(https://www.mint.com/), which does a great job not only with credit cards, but with all your monthly bill payments and expenses. In addition they help you setup management goals for your money long term and you can see where you are overspending. It is a very valuable service.
In the end, credit card companies can be beat, but you have to be very diligent and on top of your payments. Make sure that when you are making a purchase, you always have the funds to reimburse it and furthermore, never fall behind and have to deal with their interest. Make sure the card you choose doesn’t have annual fees that will be more than you actually get back and choose a card that you know will be right for you. If you do everything perfectly you might even want to get multiple cards for different situations and if you do make sure you use a management site like mint to stay on top of payment dates. I would recommend against this though, as it can become very complicated very quickly. Im sure many of you have been doing this for years and would love any of the insight you have come up with in that time as well!