Hello! Today I have a guest post article by Tom at FIREd Up Millennial. Tom shares with us some great ideas on how to select the credit card that works best for you and every purchase you make. Enjoy!
Why I Think About What Credit Card to Use for Every Purchase
When it comes to credit cards, a card isn’t just a card — not when you are trying to get ahead in your finances. Credit cards are a tool, if you are smart about using them, to help you earn rewards, cash back, or even the vacation of your dreams. The trick is to have a strategy for using them wisely, and to employ it each and every time you shop.
While I used to take my credit cards for granted and often made mistakes with them, after I earned my first free plane ticket by buying major appliances, I learned that using them carefully can be quite beneficial. Here are some of my tips for how you can use your credit cards wisely to make the most of your plastic.
Know What Rewards Your Credit Cards Offer
The first step in the process is to do a financial checkup and get to know your credit cards. After all, you can’t take advantage of your cards’ perks if you don’t know what they are!
Take some time to review the credit cards in your wallet, and find out what sort of rewards are offered by each credit card company. You may be surprised to find out that your MasterCard offers 3% cash back at grocery stores, or that your Visa gives you double points for use at restaurants.
I started by making a list of the cards that I have, and then listing the benefits of each beside them. Dig deep to find hidden perks, and call your credit card company to find out if they can offer anything else or switch you to a different card if you do not have any current rewards.
Once you have made your list, commit it to memory or carry it in your wallet until you know which one to use each time you make a purchase.
Now that you know which card has particular benefits, it’s time to put your cards to work for you. While it’s fairly simple to remember to use specific cards at different locations — like your AmEx at the gas station or a Capital One when buying plane tickets — the harder part for me was online purchases.
Like many other people, I do a lot of online shopping, and have my credit card information stored in my phone, tablet and computer. While this can make it easy to click and order, it makes it difficult to ensure that each purchase counts.
It took some time, but I manually went through and changed the saved credit cards in each online store where I frequently shopped. That way, I could make sure that my purchases were counting towards my ultimate goals, whether it was cash back or points.
Be Mindful of Credit Utilization
It can be easy to get carried away when using credit cards to “earn” rewards. The system is almost set up to make you forget that you are spending real money — until the bill comes, that is! When you are using your cards to shop smart, don’t forget that you should only be using credit cards if you can afford to pay off the balance. Ideally, to benefit your credit score, you should keep your credit utilization under 30% for each card.
Credit utilization is the amount of your credit limit that is being used. For example, if you have a $10,000 limit on a credit card and carry a $1,500 balance, then your credit utilization for that card is 15%. If you cannot keep your balance at zero, your goal should be to keep your credit utilization below 30% for each card. That will help to keep your credit score high, as a low credit utilization score shows that you are only using a small percentage of the credit that is available to you.
When you use credit cards as one tool in your financial arsenal, you can reach your financial goals more quickly. By figuring out what perks you have available and using your cards wisely, you can take advantage of these rewards — and get something for buying the things that you were going to buy anyways.
By Tom Fire, Blogger-In-Chief at FIREdUpMillennial.com