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Credit card on a purple background.
Credit card on a purple background.
Credit card on a purple background.

Published November 30, 2107.

Rewards points, built-in perks can benefit your bottom line.

Credit cards sometimes get a bad rap, but you can put them to work in your favor. Rewards cards, for example, offer perks like miles or points for dollars spent.

Card issuers use those incentives to entice you to charge more purchases to your card.

Of course, when you carry a balance, the money you pay in interest can offset incentives. You should pay off your card each month.

Russell Palmer, a manager in the STCU Card Services department, has examined credit cards from every angle. Here’s his advice:

  • Cash in your rewards points.
  • Set up card alerts to notify you of suspicious charges.
  • Read the fine print. Promotional APR offers can lead to long-term debt.
  • Use your card to set up automatic bill payments. Automatically pay your credit card bills, too.
  • Pay your full balance each month.
  • Take an occasional "credit break" to pinpoint overlooked expenses.

Make it automatic.

Use your credit card to pay recurring bills such as utilities, phone bills, or annual charitable donations.

"It's an excellent way to rack up rewards each month," Palmer says. "Setting those up can help ensure that you're not late on other bills, which can save you money, and it can make it much simpler for you to go through all your bills at one set time."

There's also a security advantage to paying with a credit card instead of entering your checking account information, for example.

"Paying though a credit card decreases your exposure," Palmer says. "If there's a breach at the payment provider gateway, it's better to have the fraudsters tie up your available credit limit than have them drain your checking or savings account.

"When you set up your automatic bill payments, set up automatic credit card payments, too. Draw from your checking or savings account to keep your credit card balance at zero — so you don't end up covering your bills by running a balance that costs you more in the long run.

"Right or wrong, (credit score is) something many, many companies use as a base to understand whether they should take some form of risk on you."

Keeping things interest-ing.

Credit card issuers make money through interest and point-of-sale transaction charges. That's why they can offer those attractive rewards in the form of cash back, airline miles, or gift cards.

That's also why card issuers may send you offers such as low-APR cards with rates that spike up after the promotional period. The higher that APR, or annual percentage rate, the more it costs you to carry a monthly balance. And just because an APR is listed as nonvariable, or fixed, doesn't mean it can never change.

"APR is extremely important for anyone who's carrying a balance," Palmer says. "If you think you can get it paid off before the promotional interest rate changes, great, because that can help you pay down debt.

"But there are a few key things to look for. What is that standard rate going to go to after the promotional period? When it does make a shift, is it going to go to a fixed or a variable rate? And what fees are attached to that?"

Palmer says that paying off your balance on a monthly basis isn't just about "keeping more of your hard-earned money in your own pocket." When you miss credit card payments, it also impacts your personal credit rating.

Building credit.

On the flip side, credit cards don't necessarily have to be a drag on your credit score.

"When you pay off your bill in full each month, it proves to lenders that you're able to handle money responsibly," Palmer says. "In turn, it builds your credit score, which will save you money on everything from buying a house to getting insurance.

"Right or wrong, that's something many, many companies use as a base to understand whether they should take some form of risk on you."

Take a credit break.

Whatever you do, don't start relying on your credit card to get by each month. If that happens, or even if you've simply become accustomed to paying by credit, take a "credit break" for a month or two, Palmer advises. Pay with cash, check, or your debit card only.

A credit break can help you get a handle on your spending and identify recurring payments — magazine subscriptions, membership fees — that can get obscured by all the one-time purchases on your statement.

"A credit break helps me to account for any and all recurring bills and to pose the harder questions to myself: 'Is this subscription worth it? Is it worth the time to pay this bill by mail?'" Palmer says. "It's a good way to force yourself to uncover those hidden fees."

Know your benefits.

Finally: Some credit cards come with benefits as varied as rental car insurance, extended warranties for items you buy with your card, and discount programs at restaurants and other spots.

Acquaint yourself with the benefits built into your card. They might just save you some cash.

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