It seems that right after the holidays, many people vow to “cut up all of their credit cards”, or “freeze them in a block of ice” or something equally as useful so that they can resist the urge to rack up more debt after having just tallied up a huge holiday bill on their plastic vice.
To compensate for the “bad rap” that credit cards are getting right now, this article is about the benefits of using credit well and effectively managing all the rewards/points available to you.
Before I go into all the pros of credit if it is used well, I do want you to be boldly aware of some stats that are very real and very ugly if credit is not used well.
- Average credit card debt per household with credit card debt: $15,799
- Average APR on new credit card offer: 14.89 percent (Source: CreditCards.com Weekly Rate Report, July 20, 2011.)
- Average APR on credit card with a balance on it: 13.10 percent, as of May 2011 (Source: Federal Reserve’s G.19 report on consumer credit, released July 2011)
- U.S. credit card 30-day delinquency rate: 3.3 percent. (Source: Moody’s, May 2011)
From the stats above, you can see that MANY households are NOT using credit to their advantage. They are paying high amounts of interest for things that should NEVER have had any interest attached to them and they are then adding LATE fees on by being delinquent on their payments!
If, you have credit cards, here are some smart ways to make them work FOR you and not AGAINST you!
1. Know your POINT system and use it well! You can see on the picture to the right a copy of what’s in my wallet. We have three personal cards, one that we use most often and two that we use only every few months. There are also three business cards as we are managing three business entities right now and it’s critical for tax purposes that we keep the money separate for each business. Each card has a separate rewards system, which is why you see the Jan, April, July, Oct written on some of the cards. This little notation reminds me to quickly log on to the rewards system each quarter to activate the rewards categories for that quarter. It’s easy to do that when I am downloading statements for that card and having a system like this reminds me to do it. We redeem all of the points around Christmas time which means that every year Christmas is virtually always paid for with cash from points! It’s great! What do you redeem your points for?
2. Never carry a balance. All I am going to say about this is, only spend what you have money to pay for unless it truly is an emergency. Buying new shoes and eating out are NOT emergencies, just sayin’.
3. Always pay your payment on time and even a few days before it is due if possible. If you follow my Money Monday or Finance Friday system and do your bills for a few minutes each week, there will never be any reason why you forget to make a payment on time.
When you have your systems in place for managing your credit purchases, paying your balance in full and on time or early each month you can literally put everything on credit and get tons of points for doing so! Since we were first married over 18 years ago, we have used this system. Everything from groceries, to gas, to our electric and insurance gets charged on our credit cards and every month they are paid off in full.
Please note that using credit in this way is not for everyone. If you know you are an impulse shopper or your spouse is, it is FAR BETTER to use CASH than try to rack up a bunch of points for purchases you will end up paying interest on.
How do you use CREDIT in your family? How do you use points or rewards systems that the credit card companies tempt us with? I would love to hear from you! You can leave a comment below or on my Facebook page.