Some people are hesitant to get a reward credit card because of the costs. True, most reward credit cards carry higher interest rates than their non-reward counterparts. However, you can avoid interest rate charges by paying off your monthly balance in full and managing your reward credit card strategically. Some of the best rewards credit card even offer 0% introductory rate which you can take advantage of. Consider these tips on how you can use your reward credit card to save money.
Charge only purchases that you can pay in full. Before charging any purchase to your credit card, consider carefully if you will be able to pay off your full balance before your due date. This is the only way you can avoid the interest rate charges and protect you from the risk of bad debt.
Don’t be late with your payment. Another important step is to submit your payments on time not only to avoid the late fees but to avoid being penalized as well. Some credit cards with rewards have very strict rules and even a single late payment may cause you to be disqualified from redeeming your rewards.
Focus on just one credit card. If you own multiple reward credit cards, racking up points can be difficult. If you will use only one reward card for all your purchases, you can rack up more points and redeem your rewards at a faster pace.
Watch out your credit limit. In your effort to earn more points, be careful that you do not max out or exceed your limit. Check your balance before using your rewards credit cards to pay bills. Remember that if you max out or exceed your limit, your credit score can be damaged too. Ideally, you should not use more than 40% of your credit limit to protect your credit score.
Do not take out cash advances. Using your reward credit card to take out cash is not recommended. This is because cash advance transactions are not covered by the grace period so you will instantly incur interest rate charges the moment you withdraw cash from the ATM. Furthermore, some of the best credit cards carry more than one APR, and the rate that applies on cash advances is often higher than the rate applicable on new purchases or balance transfers.
Get to know your limits. Is there a limit to the value of rewards you can earn within a certain period? Some cards impose a limit on the rewards you can earn in a month, a quarter or a year. Once you have reached that limit, you will stop earning points even if you continue to use your reward credit card for purchases.
Enjoy your perks and privileges. Reward credit cardholders are entitled to certain perks and privileges. For example, you may enjoy discounted price on your purchases especially if you will purchase from affiliate merchants and establishments. If you own travel rewards credit cards, your issuer may offer free travel insurance, free car rental insurance, and other incentives.