Ways to Make Your Credit Cards Work for You
There are ways in which credit cards can work against you and ways in which you can put credit cards to work for you. It all comes down to basic financial management. Unfortunately, most people 
don’t have finance degrees or were never properly taught how to manage their finances. It’s nothing to be ashamed of; however, it is something to be concerned about. Credit card debt can easily get out of hand if you’re not careful. However, if you know what you’re doing, credit cards can actually be a great asset to your finances.
It is your actions that decide whether credit cards hurt or help you. Let’s start by looking at ways in which credit cards can hurt you.
When Can Credit Cards Hurt You?
Scenario #1: Overspending
Credit cards hurt you when you allow yourself to overspend. Studies show that most people spend 12% to 35% more when shopping with a credit card, than when paying with cash. We’ve all given into temptation. We arrive at the electronics store looking to buy a new computer. We’ve decided before hand that $1,500 is going to be our budget—that is all we will put on our credit card.
However, we walk in the door and we look at the $1,500 computer, which is sitting next to the $2,500 computer, which is far cooler looking and has a much larger amount of memory and other features that we all of a sudden must have. Our common sense is out the window and a psychotic voice in our head starts telling us: “Go ahead, buy it! You work hard and deserve it. Besides, you’re using a credit card. It’s not as if you have to worry about paying for it right now!” The next thing you know we’ve swiped the card and taken our new computer home and then kicked ourselves 30 days later when the bill arrived.
Scenario #2: Paying only the minimum due
Credit card companies calculate the monthly minimum amount you owe so that it benefits them most. If you only pay the minimum amount due on your credit card it could take years before you pay the balance off in full—if you ever even manage to. A good rule of thumb to follow is to pay the minimum amount owed each month plus the amount of interest accrued. Doing this will help lower your balance each month. However, if you can make larger payments each month you should do so.
Scenario #3: Using department store credit cards
Put simply, department store credit cards charge a higher interest rate than traditional credit card companies. However, when you’re standing at the checkout counter you’re never told about the interest rate. In fact, you probably wouldn’t hear it anyway because you’d be so excited that you were saving 40% on your purchases by charging them on your new Sears or Macy’s card.
Don’t do this. Stick to the credit cards you already have and avoid department store credit. Of course, there is an exception to the rule which applies to home improvement stores. Stores like the Home Depot and Lowe’s are always offering 0% interest for six months or one year all of them time. These are great opportunities to take advantage of when you need to make a big purchase. However, make sure you pay the balance off in full before the offer expires or you will be faced with paying all of the interest that accrued.
When Can Credit Cards Work for You?
Scenario #1: Paying the balance in full
Most credit card companies would prefer that you not pay your credit card balance in full each month, but if you can you should. Doing this not only saves you money by avoiding interest charges, but it also puts you in good standing with your credit card company and makes it easier to get other lines of credit for cars and homes. It will also help get your credit line extended.
Scenario #2: Keep your finances organized
Credit cards are great for small business or freelancers. Having one credit card that is used only for business expenses keeps your finances in order and makes it easier to keep track of your tax deductions. And as mentioned in the first scenario, can help increase your credit line, which can be helpful for business when a large purchase is needed to stay lucrative and competitive with the competition.
Scenario #3: Balance transfers
Let’s say you have a MasterCard with a balance of $1,200 that earns an interest of 14%. Let’s also pretend that you received an offer on your Discover card that will allow you to transfer the balance and pay zero interest for six months. Do it. You will probably manage to payoff a small balance like that in six months anyway, so why not do it without paying interest! Balance transfers are a great way to make your credit cards work for you; however, you don’t want to transfer a balance from one card to the next to frequently because it can lower your credit score.
As you can see, credit cards are not the enemy of the American consumer. Credit cards can actually simplify life and make it possible to have nice things on occasion. However, when people start abusing them, credit cards can become their worst enemy. But with a little common sense and discipline, you can have your credit cards working for you, rather than you working for them.
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Your credit rating has a direct impact on the interest rate you'll pay on your credit cards. See below for today's APR averages:
| Credit Rating | APR Avg |
| Excellent Credit | 12.51% |
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