Nowadays, if you don’t have a credit card, life becomes inconvenient and you lose money. While the former is well-understood, why would you lose money not using a credit card? Because the cash prices are mostly the same as the charge prices despite of a 3~5% markup by credit card companies. Interest on cash for the grace period and the rewards from credit card issuers would set you back 2~3% of your total spending. However, if you do use credit cards, there’s a chance you’ll rack up high-interest debts. Following are a few strategies to rip the rewards and yet avoid the debts.
If you don’t have the cash at all, don’t apply for any credit card, period. Credit card debts are the worst loan with the highest interest. It’s better to be debt free.
If the cash will be available later, choose a card with 0% APR introduction period for 6 ~ 12 months. This is like interest-free loan. Do read the fine prints regarding terms and conditions. Put a reminder in your calendar a month before the introduction period is over. Pay up the debt and cancel the credit card.
If you have the cash, choose a card with highest desirable rewards. There is a large array of rewards that you can choose from: cash-back or rebate (some upto 5% of purchases), hotel or travel points, points for groceries/goods, frequent flyer miles, gas reward, earning towards a new vehicle, you name it. Annual fee is bank’s pure profit. Don’t choose cards with annual fee. Not worth it. Put every purchase on the card and make sure you pay up your monthly spending on time.
Do use your calendar to trigger events on payment and cancellation. You’ll be on your way to beat the credit card company and get a good reward by year end.