We recently wrote about the benefits and drawbacks of getting a credit card, where we tried to help you decide whether a credit card is right for you. Now we have some advice for those who already have credit cards – become a free rider.
Free riders are credit card users who are able to use their cards responsibly and pay off their balances each month. If you are not responsible with your credit card, you can quickly accumulate debt and end up paying hundreds of dollars in interest every year.
Believe it or not, there are ways for you to use your credit card to your advantage. The trick is to learn how to use a credit card as a small, interest-free loan whenever you need cash. This will help you avoid credit card debt and build a positive credit history.
Many cards also offer things like reward miles, cash back and other perks, so when you do use your card you’ll also be saving up towards something cool. Of course, having a card that puts cash back in your pocket isn’t worth very much if you’re also spending lots of money on interest each month, but if you learn to use your card like a free rider, you’ll end up ahead!
So what does it take to become a free rider? Here are 5 tips to help you on your way:
- Pay off your balance every month. If you make it a point to only spend within your means, you can easily pay off your credit card balance at the end of every month without amassing interest. Over a lifetime, this will save you thousands of dollars. Also, paying off your balance will positively enhance your risk profile and improve your credit history. That comes in handy if you ever want to buy a house, or need to apply for more credit.
- Pay off your balance every day. It’s easy to lose track of how much you spend. If your credit card offers rewards, it makes sense to make your regular daily purchases with your card instead of cash, but you have to be careful to make sure that have enough money to pay every month. By paying off your balance right away, you can make sure that there are no surprises when your monthly statement arrives.
- Keep your credit card count down to a minimum. There is no reason to have a wallet full of credit cards or to pay off the balance of one card with another. Find a couple of cards with rewards programs you enjoy and with low interest rates and annual fees, and only use those. Better yet, use only one. More credit cards can mean more interest payments and more debt.
- Always pay more than the minimum payment. Minimum payments are what credit card companies use to make your debt last forever, or at least for many years. Don’t fall for this scheme. Make it a point to pay more so you can eradicate that debt faster and become a free rider sooner.
- Don’t use credit card checks. Some credit card issuers will send you these checks in the mail, but the interest rates are higher and you will have to pay the amount back in full without a grace period. If you want to become a free rider, avoid using these checks at all costs. Just rip them up and throw them out.
If you can follow these guidelines, you can eliminate or avoid credit card debt and use your credit card to your advantage. However, if you have had problems with debt in the past, there’s a safer alternative to a credit card – the Payza prepaid card. With a prepaid card, you load your money before you ever spend it so you don’t have the risk of overspending and ending up in debt. For more information about prepaid cards see:
Now that you know how to use a credit card to your advantage, it’s up to you to use it responsibly.