Most financial experts are likely to declare that credit cards are the bane of modern existence. They aren’t necessarily wrong. Plenty of consumers around the world have learned the hard way how difficult it is to pay off a high credit card balance. The interest rate, the annual fee and the ability to buy what cannot truly be afforded combine to wreak havoc on a consumer’s financial situation.
However, if credit cards are evil, then they are a necessary one.
Try to rent a car or pay for a hotel room without one. It may not be impossible, but it is likely to be very difficult and present a number of hoops through which the consumer must jump. In addition, credit cards are usually a safer bet against fraud than a debit card when making purchases online. If a credit card number is stolen online, then at least the thieves don’t have access to funds in a checking account and most credit card companies are quick to act when they suspect fraudulent activity and work to minimize the problem.
So if having a credit card is actually a good idea, then there must be ways to handle it intelligently. Start by getting the right card. Credit cards with 0 interest are the way to go. The no interest plan may be temporary, but if the rate that is charged after the introductory period expires is competitively low, then this card may still be a good option. Another important factor in making a frugal credit card choice is getting a card that does not charge an annual fee. Some credit card companies actually charge consumers a sizable yearly fee just for the privilege of having their card. Others do not. Always go with the company that does not charge an annual fee – this saves the consumer significant amounts of money throughout the life of the card.
A credit card bill should always be paid on time in order to ensure that it remains a frugal spending alternative. Late fees are substantial and further penalties, such as increased interest rates, can make just one late payment a very expensive prospect. Additionally, the smart use of credit generally dictates that the consumer should never charge more than they can pay off each month. This way, even a card that does not have zero interest is unlikely to cost the consumer much extra money.
Frugal consumers can also win with credit cards by choosing one that provides meaningful rewards for using the card. Travelers will appreciate a card that gives them frequent flyer miles. Some cards give cash back or provide rewards like gift cards to gas stations. By using the credit card appropriately the consumer can reap substantial financial benefits that actually pay them for using the card. Seen in this light credit cards with 0 interest sound like a pretty good deal for most consumers. When kept under responsible control the use of credit cards can be immensely helpful.
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