The best investors know that either they work for their money or their money works for them. The reality for most consumers is that they have to work for most of their money, but that doesn't mean that having the mind of a professional investor can't be profitable. One investor said that credit cards are a place to send money to die and the way most people use their credit cards, that's true. (For more on credit card, see 10 Reasons To Use Your Credit Card)

TUTORIAL: Credit Cards

It doesn't have to be that way. There are ways to make your credit card work for you instead of you throwing money at it.

Pay It Off
Of course you know that you need to pay down debt, but before you can make your credit cards work for you, you have to eliminate the interest you're paying. Interest, sometimes at rates as high as 20% or more, equates to big money thrown away to make purchases that could have waited until later in most cases. Before considering any other strategy for your credit cards, address your interest payments by paying down the debt and finding a new card with a lower long-term rate.

Rewards Card
If your credit card doesn't offer you rewards points for all of your purchases, you need to get a different card. Although some credit cards charge an annual fee to enroll in a rewards program, many do not. Don't pay an annual fee, but do find the rewards program that fits your lifestyle. If you spend a lot of time in your car, find a card that awards double points to gas station purchases. If your purchases are more family oriented, you need a more multifaceted rewards card.

When you pay your card in full and avoid interest charges, the credit card company is essentially paying you to use their card. Your card use is generating income for the card company from the merchant which makes it worth the card company's while to encourage you by giving you rewards points.

Extended Warranties
Are you the warranty type? If you purchase extended warranties for your electronics or other items, you may not be aware that your credit card may give you that coverage free of charge. American Express gives some of its card holders a minimum of an extra one year of protection. Along with American Express, Visa offers similar protection on some of its cards. Not all cards are eligible for extended warranty coverage and some items, including power tools, pets and many other items are excluded from the coverage. (To learn more about extended warranties, check out Extended Warranties: Should You Take The Bait?)

Car Rental Insurance
Did you know that most major credit cards include insurance if you rent a car and get into an accident? Those high fees that rental car companies charge for the optional insurance can be completely eliminated thanks to your credit card, right?

Actually, it isn't that simple. Your credit card company offers coverage, but there are limitations. The primary renter has to be the person who was driving during the accident, some cards won't cover pickup trucks, the rental period has to be less than 30 days, and the rental has to be 100% with the card offering the coverage, to name only a few of the exclusions. This coverage could save you a lot of money, especially if you're a frequent renter, but don't decline the rental company insurance coverage until you have a complete understanding of your credit card company's coverage.

Pay Your Balance With Points
If you have a card with cash rewards or your points can go towards a wide variety of nice merchandise, say no to spending those rewards. Most rewards cards will allow you to put your rewards points towards your balance. This increases the value of the rewards points because they are not only paying down the debt but they're also reducing your interest burden. Don't use your points to purchase more stuff. Make those points work for you by paying off debt.

The Bottom Line
Generally, avoiding the use of credit cards unless you're highly financially disciplined is well-advised. Remember that before any of the above perks of using a card actually become perks, you have to cut out those interest payments. There are very few ways for the consumer to make more money than to pay off existing debt. (To help reduce your debt, check out Expert Tips For Cutting Credit Card Debt.)

Related Articles
  1. Credit & Loans

    Walmart MoneyCard Vs. Walmart Credit Card

    Discover how the Walmart MoneyCard and the Walmart credit card have different benefits that may influence your decision on which one to choose.
  2. Savings

    These 10 Habits Will Help You Reach Financial Freedom

    Learn 10 key habits for achieving financial freedom, including smart budgeting, staying abreast of new tax deductions and the importance of proper maintenance.
  3. Credit & Loans

    Have Bad Credit? 6 Ways to a Personal Loan Anyway

    It'll cost you more, but borrowing is definitely doable. Here's how to proceed.
  4. Credit & Loans

    How To Minimize Holiday Debt Before It Happens

    Holiday expenses can drown you in debt. Find out how to avoid this festive spending hangover.
  5. Credit & Loans

    These Are The Best Credit Cards For Making Balance Transfers

    Handled correctly – and very carefully – a promotional credit card balance transfer offer can save you money. Here are some of the best deals around now.
  6. Investing

    How to Raise Your Credit Score Quickly

    Here are the best tips for raising your credit score quickly.
  7. Credit & Loans

    Getting Your Name Off A Cosigned Loan

    If you want to remove your name from someone else’s loan, there are four key ways to do it.
  8. Credit & Loans

    How Credit Card Delinquency Works

    When you pay less than the minimum monthly payment on your credit cards, you become delinquent.
  9. Credit & Loans

    5 Bad Moves That Will Torpedo Your Credit Score

    Your credit score can change if you aren't careful. From missing payments to carrying high balances, there are many ways to torpedo your credit score.
  10. Credit & Loans

    5 Common Misconceptions About Your Credit Report

    Your credit report is one of the most important factors in determining your ability to get loans and new credit and has a major influence on your rates.
  1. Is Apple Pay safe and free?

    Apple Pay is a mobile payment system created by Apple to reducing the number of times shoppers and buyers have to pay for ... Read Full Answer >>
  2. Can you use your Walmart credit card at Sam's Club?

    Consumers can use their Walmart credit cards to shop at Sam's Club. However, they cannot use their Walmart credit cards when ... Read Full Answer >>
  3. How can you cancel your Walmart credit card?

    Walmart offers two types of credit cards: the Walmart MasterCard and the Walmart credit card. How to Close Your Walmart Credit ... Read Full Answer >>
  4. Does the Walmart credit card have an annual fee?

    The Walmart credit card does not charge annual fees to its cardholders. It does, however, have other fees associated with ... Read Full Answer >>
  5. How do NetSpend cards work?

    NetSpend prepaid MasterCard and Visa cards are popular prepaid debit cards requiring no minimum balance and no credit check. ... Read Full Answer >>
  6. Can the Best Buy credit card be used anywhere?

    The Best Buy credit card can only be used in Best Buy stores and when making purchases online through the Best Buy website. ... Read Full Answer >>

You May Also Like

Trading Center