Here are some tips from the “Council of Governors of the Federal Reserve” to get the most out of your credit cards:
Pay on time
Paying your credit card account on time helps you avoid additional charges for late payment and will prevent a high interest rate from being added to your account, as well as helping you keep a good credit record. A good credit history represents a high credit score, which will help you qualify for low interest rates. Know the date your payment is due. If the payment date is not convenient for you – for example, if your payment is due on the 10th and you are paid on the 15th – contact your credit card company to see if there is a possibility to change your payment cycle that more fit your cash flow.
Stay below your credit limit
If you exceed the credit limit on your card, the credit company may charge you an extra cost and increase the interest rate to a much higher penalty level. To prevent this from happening, keep a record of your expenses or find out your balance over the internet. Additionally, be aware that some merchants (for example, hotels and car rental companies) charge your card a “reserve” value based on the approximate calculation they make on the amount you are going to spend. This can reduce your credit availability until the final payment is processed. See Blocking your Credit and Debit Card (in English).
Avoid unnecessary costs
Credit companies not only apply charges for late payments and for exceeding the credit limit, but also for cash advance, balance transfer, and for repayment due to lack of funds. Some companies apply extra charges when you make your payments over the phone. Pay attention to all those transactions that create those extra charges. If you need a cash advance, withdraw enough funds so you don’t have to ask for a second advance later – and incur a second extra charge – at the end of the month. Read your credit card contract to learn more about the extra charges or fees that the credit company charges on your card.
Pay more than the minimum charge required
If you cannot pay your total balance, every month, try to pay as much as you can. Over time, you will pay less interest charges – money that you can use in other things and at the same time allow you to pay your balance in less time. See the Credit Card Payment Calculator on the Federal Reserve page to determine several possibilities to schedule the punctual payment of your balance.
Watch for any change in your account conditions
Credit card companies can change the terms and conditions of your account. They will send you notices, in advance, about changes in charges, interest rates, billing, and other aspects. By reading these “change in terms” notices you can decide if you want to change the way you use your card. For example, if cash advance costs increase, you may decide to use a different card for cash advances. If you have a card with a variable interest rate, or a card with an introductory rate that is about to end, be cautious, since credit companies are not required to send notices about the increase in your interest rate. Interest rates are included in your monthly statement. Read your statement carefully and take note of any changes to it.