The advice you get from some finance blogs is to use extreme measures to avoid running up credit card debt.
They may suggest things such as cutting up your credit cards or placing them in a container of water and freezing them to prevent you from using them – at least until they thaw.
But I know that credit cards can be used to your advantage if you are able to use them with self control. Like anything else, they are a tool. It’s you that determines if they will be an asset or detriment to your finances.
Here are some ways you can use credit cards to your advantage.
Pay Your Balance off Each Month
Don’t run your credit card balance up so high you can’t pay it off each month. Doing so will allow you to eliminate paying interest on your balance and giving away your hard earned money to credit card companies for free. In addition, you potentially have the ability to use that same money to earn interest for yourself for the same time period.
If you aren’t able to pay the balance each month, always make the minimum payment and make a larger payment whenever possible. Another option would be to look into setting up an automatic payment plan to keep from missing a payment. Never go over your credit limit and watch your balance closely.
If you can do these things, you can actually make money by using credit cards with rewards programs.
Use Your Statement Closing Date to Your Advantage
Don’t confuse your account statement closing date with your payment due date because they are not the same thing. The account statement closing date of your credit card is the last day of the billing cycle. Any purchases you made between the last statement closing date to the current one will be included on your current statement, and any purchases made after the current statement closing date will go on the next statement after. You can figure out the current month’s statement closing date by adding the number of days in the billing cycle to the previous account statement closing date on your credit card bill.
To use this knowledge to your advantage, you need to know that there is also a 21 day grace period between the date your statement closes and the payment due date. This means if you make a charge to your card the day before your closing date you will have only 21 days to pay it. However, if you make a charge the day after the closing date you will have an additional month until the next billing cycle closes as well as another 21 days to make the payment. You could feasibly hold off on a larger credit card purchase until the day after your statement closing date to gain an additional month before the payment is due.
Maintain a Consistent Card
Switching credit card companies too frequently can affect your credit score. Sometimes you may need to make a change to a card that offers better service, or to consolidate credit card debt and save on interest. But as a rule, don’t change card companies like you change your socks or your credit score will suffer.
By knowing how to use credit cards to your advantage, you can keep your credit cards from being on ice and available for use when and if you need them.
Do you use credit cards to your advantage? How?