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The answer to what you shouldn’t put on your credit cards is fairly simple. You shouldn’t put anything on them that you can’t pay off at the end of the month or, worst case, the following month. When you start carrying balances forward you fall victim to what some people have termed the most powerful force on earth – compounding interest. You could end up paying interest on interest, which can be a slippery slope towards very serious problems.
Your best friends or worst enemies
Credit cards have gotten a bad rap for good reasons. If you use them sensibly they can be good friends. But if you don’t they can become your enemy and you could end up drowning in debt. According to one recent study the average American has more than $6000 in credit card debt and the average for indebted households is $15,863. If you were to owe that $6.000 at 15% and made only the minimum payment ($125) each month it would take you 284 months to clear the debt. Just think. You’d be paying on that $6,000 debt for more than 23 years!
The benefits of credit cards
There’s no doubt about the fact that there are benefits to using credit cards. You can use them to earn rewards points, free miles, cash back or all three. Plus, when you use a credit card it lets you defer payment for a few weeks or even more than a month. Just keep in mind that you will only enjoy these benefits if you pay off your balance in full at the end of the month. Otherwise the interest you’ll pay could actually offset any rewards you earned.
The best things to put on credit cards
What are the best things to put on credit cards? The first is travel. When it comes to booking flights, rental cars, hotels and other vacation costs credit cards can help you accumulate lots of points or airline miles that you could then use towards upgrades, flights or hotel stays. Some even offer benefits beyond this including concierge services, rental car insurance, travel insurance, lost luggage insurance and access to nicer airport lounges. In the event your credit card is stolen or lost while you’re vacationing you can alert the card issuer to dispute and void any fraudulent charges. When you travel internationally there are cards that will give you more favorable exchange rates. On the other hand, you need to make sure that your credit card is not one that tacks on a fee of 3% for foreign transactions.
Electronics and appliances
Credit cards often offer extended warranties, price protection, and return protection. This means it’s good to put big-ticket items like laptops, computers, refrigerators, washers and dryers on your credit cards. Make sure you check to see which services are offered by your particular card. Some MasterCard, Discover and Citibank cards come with a “price rewind” service so if the thing you purchased goes on sale the card issuer will reimburse you the difference.
Online purchases
Credit cards generally offer better protection against fraud than debit cards and checks. This could be the reason why 50% of consumers recently surveyed said they liked to pay for their online purchases with a credit card. In fact, most credit cards limit your liability to $50 in the event of fraud or identity theft and some will even waive the $50. If you do use your card to make online purchases don’t do it when using public Wi-Fi or a public computer. Wait until you are on a secure site.
Fragile items
If you buy a new laptop, cell phone or some other fragile item it’s good to put the cost on a credit card as it probably offers extended warranties for purchases and even replacement services. Some cards will double the manufacturer’ s warranty on your purchase for up to a year, which would eliminate the need to buy an extended warranty from the store.
Special categories
Many of today’s credit cards offer multiplier rewards in special categories such as gas, groceries, and dining out. These special rewards can be for a month or a quarter. For example, if you were to dine out in May this could double or triple your points in a rewards program or the amount of cash you get back. You’ll be alerted to these promotions several weeks in advance so be sure to activate them.
Automatic payments
When you put automatic payments on a credit card and there’s any kind of a dispute you would have proof of payment. If you need to hold those automatic payments for any reason or for some period of time all you would need to do is call your credit card company to take care of this. As noted above it will also likely credit your account right away for any erroneous charges or fraudulent activity.
It’s a good time for credit cards
Now’s a really good time for credit cards if you have good credit. Credit cards have become very competitive and banks are getting more creative about getting and keeping their customers. For example, rewards programs have gotten more flexible. This is in response to customers’ complaints about the rigid rules regarding blackout dates or specific retail partners. As a result, the latest rewards programs generally allow you to earn and redeem rewards in a more flexible way.
Cash back programs are getting more generous. While the industry standard for cash back is still 1%, savvy card users can earn 2% or more. For example the Citi Double Cash Card allows customers to earn 1% on purchases and another 1% for paying them off.
Shop around
If you’re not happy with your credit cards and their rewards or if you simply want to see what else is available now’s a great time to shop around as introductory offers have also gotten better. As an example of this, cash bonuses for first timers increased 7.45% over last year and offers based on miles increased more than 10%. So if you’ve been using the same card or cards for the past several years go to a site such as CreditCards.com where you can check out cards based on criteria such as low interest, cash back, no annual fee and points. You may find deals that are much, much better than what you’re getting with your current cards.
