Credit Card Shopping: Match your Spending Habits to Save Money
ByYou pay your bill off completely every month. You pay the minimum due every month, and you let a manageable amount revolve on your credit card. You pay the minimum due every month and your credit cards hover near their maximums. These are all payment profiles, one of which probably fits most credit card users, and there are a number of different credit cards that are tailored to offer the best value for any one of these scenarios. Match the right card with your spending and payment habits and you maximize your savings. Fail to do so and you might spend hundreds or even thousands of dollars needlessly.
You might be one of the hundreds of thousands of consumers who are spammed weekly by credit card vendors either by email or regular mail, and if you’ve chosen a credit card from the selection that has shown up in your mailbox you’ve probably not chosen the best one available for your particular spending pattern. Credit cards are big business today. Credit card vendors offer a huge array of incentives to lure your business. Four of the most common of these are cash back rewards, award point good for travel services and merchandise, 0% balance transfers and low interest on outstanding balances. Some even offer you the ability to custom design the picture on the card!
Whether you are interested in a credit card or not, when you get an offer in the mail check out the Truth in Lending Disclosure. Every credit offer contains one – it is required by law – but they can sometimes be a challenge to find in all of the marketing drivel included in the offer. Make a game out of reading the disclosure before discarding – it’s fun! Pay particular attention to the interest rate that they’re offering – it’s usually high, and isn’t even close to the best deal that you can get if you actively shop for credit cards. As a matter of fact, some of the interest rates are downright predatory! Whatever the interest rate is, find it, have a look at it, have a laugh and then throw it away. The best place to shop for real credit card deals is online. You can compare products head-to-head there, and it’s convenient.
While you were scrutinizing that credit offer that came in the mail, or the one that they were offering at the mall kiosk, you may have noticed that the focus of their sales pitch was on one of these four types of rewards: 0% balance transfers, cash back, low interest rate(s) or award points. Also, whatever their area of focus, they didn’t exactly shine in the other three areas and may actually be extremely predatory in one or more of those. Here are a few tips you can use to choose the right credit card for your payment and spending habits:
1) Do you have a history of paying off the complete balance on your credit card every month? If so, you shouldn’t be too concerned about the interest rate on your credit cards. However, don’t discard interest rate completely! Keep the grace period in mind – that’s the amount of time between when you purchase something with your credit card and when the bank begins to charge interest on that purchase. Often credit card companies charge interest beginning on the date of the purchase – others offer a grace period that lasts until the end of the calendar month, or for 30 days. A longer grace period can help you save money. Also, if you have balances on other credit cards that are charging interest, a card that offers 0% interest on balances transfers may be the choice for you. Or choose a card that offers reward points – your next vacation could be free!
2) Most credit card holders maintain a manageable balance on their credit cards – that means a balance somewhere between 5% and 40% of the maximum balance allowed. If this is your usage pattern, you should of course seek a low interest rate credit card, but you may want to also take advantage of some of the other benefits offered such as cash back on purchases. This shows responsible use of your credit, and makes you an attractive customer to credit vendors; you have proven that you are a good credit risk – you pay your bills in a timely manner – and you maintain a positive balance. That makes you a good potential credit customer.
3) Don’t depend on credit card marketing material that comes in the mail to help you find the best deal – shop for credit cards that offer the very lowest interest rate available, and the easiest way to do this by far is on line. If your credit cards are always max’d out – at or near their limits – then interest is everything. You should absolutely find the card with the lowest interest rate available. You might even choose to pay a small annual fee to secure a card with a lower interest rate than you might find with a fee-free credit card. With a low interest rate you can take control of the flow of interest that you pay on your outstanding balance.
4) Be sure to pay your bills on time. This is important regardless of your history or credit balance. Also, always pay the minimum due at the very least. Credit card vendors often raise the interest rate on your credit cards if you pay too little or too late – they can do this without telling you, and late payment on one card can affect the interest rates on all of your other cards. Be sure to read your credit card statement carefully every single month. Pay special attention to the interest rate that they’re charging you. If it goes up, it might be time to move your credit account to a different credit vendor.
The more you are informed as a consumer, the better your chances are to save some real money; this is true in all business and particularly true with credit cards. The amount of money that you can save by shopping for the right credit solution depends upon your spending habits and your payment schedule, but it can amount to hundreds or thousands of dollars per year. Be credit wise: adopt a habit of reviewing the credit cards in your wallet or purse once or twice a year, and always be on the lookout, shopping for better offers. Chances are that if you’re using a credit card that you’ve had for over a year or two, you can save money – there are better deals out there.
