A credit card represents an amazingly secure and convenient method of payment, but most people aren't harnessing a fraction of their card's strengths. The key to earning the most valuable rewards and benefits from your credit cards, while minimizing fees, is to use one of the right credit card strategies for your needs.
Credit Card Strategies for Getting Out of Debt
About half of all American credit card users regularly carry a balance on at least one of their credit cards, and a significant amount of these cardholders are struggling to pay off their credit card debt. Unfortunately, many credit card users are not thinking strategically about getting out of credit card debt. Their first priority should be to transfer their balance to a credit card with the lowest possible interest rate. In fact, there are many credit cards that offer new applicants 0% APR financing on balance transfers, typically with a 3 percent balance transfer fee. But when credit card users are able to take a break from interest charges for 15 months or longer, they can pay off their debt much faster, while incurring far fewer interest charges.
Credit Card Strategies for Earning Cash Back Rewards
The market for rewards credit cards is incredibly competitive, and credit card users need to stay on top of the latest trends in order to earn the most valuable rewards. To earn the most cash back rewards, cardholders need to have one card that offers the best rate of return on all general purchases, and one or more other cards that offer bonus levels of cash back from purchases at specific categories of retailers. For example, the Citi Double Cash card currently offers 2 percent cash back on all purchases, which makes it perfect for general spending. Then, a second card may be better for spending at grocery stores, where cardholders earn up to 6 percent cash back, or 3 percent at gas stations and department stores. By holding multiple cards, and using each where it is strongest, you can maximize the rewards you earn.
Credit Card Strategies for Building Credit
Using credit cards responsibly is a great way to build your credit score, which will allow you to qualify for home and car loans at the most favorable terms and lowest interest rates. The most important thing that you can do to raise your credit score is to always make your payment's on time, as your payment history will make up 35 percent of your FICO score. Another 30 percent is based on the amounts you owe, so it is vital to keep a very low level of debt. But at the same time, your debt to credit ratio will be a component of the amounts you owe, so it is important not to use up more than 30 percent of your available credit at any time. So in many cases, it will actually help your credit score when you apply for a new credit card, as it will reduce your debt to credit ratio for a given amount of debt.
In addition, having multiple credit card accounts open and in good standing will also serve to increase your length of credit history, which makes up another 15 percent of your FICO score. This is especially important for young adults, recent immigrants, and others with a limited credit history. Finally, the amount of new credit you have in use and the types of credit you use will both comprise 10 percent of your FICO score. Therefore, it's important not to apply for several new lines of credit within a short period of time, and it will help your score to have different kinds of credit, not just credit cards.
By finding the right credit card strategy for your needs, you can leverage these products to meet your financial goals.
Disclaimer: This content is not provided or commissioned by the credit card issuer. Opinions expressed here are author's alone, not those of the credit card issuer, and have not been reviewed, approved or otherwise endorsed by the credit card issuer. This content was accurate at the time of this post, but card terms and conditions may change at any time. This site may be compensated through the credit card issuer Affiliate Program.