Get The Rewards Of Credit Cards Without The Risks

Credit cards have a bad reputation. Although credit card debt can be toxic, cards can have multiple valuable benefits when used responsibly. If you’re diligent about paying off your balance and don’t spend more than you can afford, having a credit card can actually be an excellent way to manage your household finances and earn rewards. Here’s how to use your cards without abusing them:

1. Find a card with low interest and high rewards. Rewards cards are a popular option these days, and for good reason: For each dollar that you spend, you earn rewards that you can redeem toward future purchases, airline miles, gift cards or other benefits. Many of these cards have introductory offers of no interest for a certain number of months. If you get the card and use it while it’s interest-free, there is no risk in having the credit card.

2. Make all of your purchases on the card. Instead of making multiple purchases with your checking account, charge everything to your credit card, and then pay it off in a single payment. This will help you gain rewards points quickly while leaving money in your bank where it can earn interest. It will also save money on potential overdraft charges or other bank fees if you make an accounting error; just be sure you have a high enough credit limit to cover your purchases.

3. Choose rewards that benefit you. With so many different types of rewards cards available, you’re bound to find something that will suit your needs. Choose a reward that will be useful to you, and pick a card that will reward the type of purchases that you make. For example, some cards give extra points for purchases made on gasoline or groceries. If you’re using the card for daily expenses, it might be a superior option for you.

4. Utilize the extra features. In addition to rewards points and purchasing power, some credit cards come with additional features like extended warranties or rental car insurance. Some credit card companies also offer discounts on certain types of products and subscriptions. Be sure to check any card you obtain to see what additional rewards it comes with, and use them whenever possible.

5. Get a new card frequently. Once the zero-interest term ends, the credit card becomes less valuable. Transfer the balance, if any, to a new card or simply obtain a new credit card and cancel the old one. By keeping just a few credit cards active at a time, you can reduce the impact on your credit score and avoid interest rates.

By utilizing credit cards, you can increase your credit score and expand your purchasing power. Although credit card debt can spiral out of control, responsible credit use can actually increase the value of your bank account by allowing you to earn interest and rewards and avoid fees. Just be sure to budget your expenses and always read the fine print of your credit card agreement so that you know exactly what your responsibilities are and how much each purchase truly costs you.

Jessica Bosari writes about personal finance for the money management blog,