A quick glance at television commercials or online pop-up ads shows that reward programs are the name of the game for many credit cards. If you have a high credit score and pay your bills on time and in full, chances are you can benefit from choosing cards with attractive incentives. Are you getting the most bang for your buck when you pull out the plastic? Here are four tips to consider as you look for a more rewarding approach to using credit cards:
Paul Vecker talks about credit card holds that gas stations place on credit cards, (MGN Image)
Tip #1 – Review your current cards
Many investors hold the same cards for years – even decades. While this is often a responsible approach, now may be the time to review the cards you own. Your credit worthiness (as determined by your income, credit history and other factors) can change over time, along with your financial situation. This means the right cards for you today may be different than the ones in your wallet. Opening and closing accounts may negatively impact your credit score, so proceed carefully.
Tip #2 – Identify cards that offer your best opportunities
Determine the type of rewards that matter most to you. Are you looking for airline miles, the chance to earn points toward concert tickets, bikes and other items, or would you prefer cash back? Do your favorite retailers offer cards with appealing rewards? Consider your financial goals and how credit card benefits could help get you closer to achieving them. For example, earning airline miles could reduce the cost of your annual vacation, or extra cash could be invested in your IRA. Be selective and don’t fall into the trap of spending money just to earn points.
Tip #3 – Find common ground
If you are single, decisions about which credit cards to hold are up to you. But for couples who share financial responsibilities, it’s important to align on which cards to apply for and whether to have joint or separate accounts. Lay out your spending strategy, such as determining who will pay the bills each month or a dollar amount that requires a conversation with your spouse before purchase. Align on how to allocate your reward points so you’re working toward a common goal.
Tip #4 – Be stingy about fees
Many attractive credit cards have no annual fee or waive fees for an introductory period. Check the fine print, particularly if you have plans to travel abroad, as foreign transaction fees may also apply. Minimizing fees can help you maximize the value of your reward points.
Credit cards these days can be rewarding, especially if you use them wisely. For more information consider reading Balancing priorities: Pay down debt or invest? Consult with a financial professional if you’d like help reviewing your finances.