Saving Money Using A Credit Card

September 24, 2008

Saving Money Using A Credit Card

Everywhere you look these days there are offers for credit cards that offer rewards. If you are like many consumers you wonder if these rewards actually pay off in the long run. With a little more investigation consumers and businesses frequently find these cards usually carry high interest rates. With our budgets are stretched almost as far as they can go these days maybe it is a good time to have another look.

First, credit cards come with directions. What you agree to with your signature on the dotted lines outlines guidelines for both the consumer or business and the credit card company. As a wise consumer you must read the directions or in this case your rights and responsibilities. Not readying and understanding will cost you money and will not save you money, so read the contract.

In some survey more than half do not use the rewards gained with use of their cards- now that's a lot of accrued miles, rebates, hotel rooms and points sitting around unused.

Most folks who have credit cards carry a balance. Only about 40% of us, or 30% of U.S. households overall, regularly pay our balances in full.

Many don't bother to redeem. Many have no idea what benefits their cards offer. If they did, more people would likely take advantage of them -- which might cause the issuers to dial back.

Arbitration. What consumer hasn't gotten cross-threaded with a store or other company over a purchase? You try to resolve their mistakes, only to run into brick walls with uncaring or unavailable customer-service staffs.

Automatic bill payment. Life is complicated; One way is by charging regular bills to credit cards that are promptly paid off each month (also by automatic payment).

Bulwark against identity theft. When we pay with a check or a debit card, we are providing a potential pathway into our bank account. And once a thief raids your bank account, getting your money back can be a struggle. Plus, you often have to close your account and open a new one to prevent future incursions.

Credit improvement. Credit cards can help you build or restore your credit rating. As long as you pay your bills on time and use only a portion of your credit limit (under 30% is good; under 10% is even better), you're helping to polish your credit scores.

Extended warranties. Platinum MasterCard doubles any manufacturer's warranty to extend up to a year beyond the date the original expires. American Express and Visa's Signature cards offer similar benefits. Consumer Reports tells us most extended warranties are a waste of money, but you can't beat the price of this one.

Interest-free loans. If you pay your bill in full every month, you're essentially getting an interest-free loan on every purchase you charge.

Purchase protection. Higher-end cards tend to come with several types of insurance, including coverage if something you buy is stolen or damaged. Platinum MasterCard, for example, provides "Purchase Assurance," which pays to replace or repair items purchased within the previous 90 days. Visa Signature and American Express have similar benefits.

Rental car coverage. Auto insurance provides most of what we need to waive the rental car companies' expensive coverage.

Rewards, rewards, rewards. How do I count the ways? Plane tickets, hotel stays, cash back, discounts . . . a month doesn't go by that we don't reap some reward from our cards. I don't have to do anything to get the rebate. I just use the card with those companies, and the discount is applied to my purchase.

Of course, not everyone is a good candidate for a rewards card, or even a credit card, for that matter.

Some people simply can't control their spending; to them, a credit card is the equivalent of a drink to an alcoholic. If that describes you, you're wise to steer clear of plastic.

If your situation isn't so dire, but you do carry a balance, then look for a low-rate card so you can pay off your debt as quickly as possible. Let the rewards wait; being debt-free will be the best reward you can earn.

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