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How To Use Your Credit Card Wisely

Updated on August 26, 2009

Credit cards are a staple of the American capitalism. The modern capitalist society uses credit cards in high quantity, which has bring trouble to a lot of consumers.

The first problem, is that consumers are not educated to use credit cards effectively. Most people don't know about the perils of using a credit card without proper control. And, in fact, most people end up very burn by the system.

Americans are at an all time high on credit card debt. Despite the current economic crisis, the use of credit cards hasn't abated enough to move most consumers out of trouble. The average Aerican household owns a lot of money to credit card companies, sometimes dozens or even hundreds of thousands of dollars.

The sad thing is that credit cards can really be used wisely. And if used well, they can be a way of reducing expenses, instead of increasing debt. In the following, I provide a number of ways in which credit cards can be used in a positive way. In this way, you don't need to cut them, but use them to your own advantage.

Some Ways NOT to Use A Credit Card

In the first place, never let any remaining balance on your credit card. This is the number one rule, and if your follow this simple rule you will be ahead of 99% of the people that have credit cards. The reason this is so important, is that the single biggest reason for failures in using a credit card is paying the minimum each month.

If you pay just the minimum each month, you are pretty much guaranteeing that you pay the maximum of interest rates and fees. The fact is that credit card companies calculates the minimum value that customers can possibly pay that will maximize their profits over the years. And for a bank, profits come in the form of interest rates that you have to pay year after year.

Another big risk of maintaining a balance is that you leave no room for mistakes in the future. For example, if you have no balance, if you lose a job you can still use all those credit cards that you have available to you. The same is true if you want to start a company, and you have leave off credit cards for a few months.

With a balance on the credit card, this is not possible. If you lose your job, you cannot use the credit cards because you already have to pay the minimum every month. It is really a lose-lose situation in which you don't want to be caught.

Now that you know what not to do, let us see some useful things that you can do with credit cards.

Some Ways To Use Credit Cards Wisely

To basic way to use a credit card productively, is to use it to generate more money. Here are some examples:

Funding a business: in the early days of a business, it is really difficult to make a profit. You need some kind of investment to keep afloat, until you are able to generate enough revenue. This is a situation where a credit card can help. It is a way of financing yourself during at least a few months, until your business starts generating a profit.

It may be a simple way to do this financing because you don't need to ask anyone for permission. The credit is already there, you just need to spend in the way that you believe is the most wise.

One note of caution however: just because you can spend money on credit cards this way, it doesn't mean that it is the best way to do. You could find cheaper sources of money, such as an investor, or a traditional bank loan. If these options are possible, they they are better, because the interest rates on credit cards are very high.

Also, remember that a lot of people got into trouble with credit cards by using them to finance a business that failed. Make sure at least that you have a plan for the case that this happens.

Use the credit card to get advantages: you can use your CC whenever it provides you an advantage that you wouldn't have with cash. Credit card companies do this to entice you to use more and more. Eventually, people will get into trouble if they don't pay on time. But if you are responsible and always pay the credit card, such benefits are real, and you should use them.

Examples are:

  • Airline miles: use credit cards (specially if they are corporate) to get you credit miles on airlines. You can then fly for free in your next vacation, or stay in a nice hotel.
  • Rebates: some credit cards give cash rebates of up to 3% in normal transactions. This is a great way of taking advantage of the credit card company. You can get an automatic rebate just for buying the product using the credit card. Don't forget, however, that not paying the credit card on time will automatically kill the benefit, because they are certainly charging much more than 3% a year on interest rates...


Credit cards are not a bad thing, but they can be easily misused. If you want to make money with a credit card, you have to pay it on time first. Then, use the advantages it provides, such as free travel miles, hotel stays, or cash rebates.If you want to make real money, you should look at opportunities such as starting a business on the web. If you want to get more information about this, sign up to this newsletter, and you will get tips on how to make more money for you and your family.


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