Smart credit card use: From Choosing to Optimizing Rewards
In the United States, over 80% of adults possess credit cards, yet many remain unaware of their full potential. Beyond their conventional use for borrowing and repaying over time, credit accounts can actually yield profits. Alongside direct perks like rewards, cash back, and loyalty programs, credit lines provide protection against fraud and prevent debt overload. However, missteps in card usage may lead from low credit scores to bankruptcy. By Q3 2023, an average US consumer held 3.9 credit cards.
Choosing the right credit card is where every financial journey begins. After all, not all cards are cut from the same cloth. Some offer travel rewards, others offer cash back on purchases. There are cards with low interest rates and ones with no annual fee. Which one should you choose? How can you avoid common mistakes? And how can you maximize your rewards? Below, we answer these questions and more to help you use your credit account wisely and efficiently. Our guide to using money wisely with Rates.fm will show you how a simple plastic card can be your key to financial independence and smart money management.
Choosing a credit card
Choosing a credit card can be confusing because of its inconsistencies. For example, an interest-free period can be compounded by a high interest rate outside of that period. So let’s understand the different types of cards so you can choose the right one, avoid common pitfalls, and learn how you can make money by paying off your debt.
In terms of benefits, in the back row are standard and most common cards, offering a classic package of services with a mandatory grace period (a marketing ploy that can turn into a trap in the future). Moving closer to the forefront, we encounter instant credit cards, followed by co-branded ones that provide discounts and bonuses for purchases from partner companies – particularly advantageous for loyal customers of specific brands. And in the front row are Gold and Platinum, each with its own exclusive terms and conditions. Notably, premium accounts share one common trait: everything is negotiable.
Table of some popular credit cards in the US:
Card | Annual Fee | Opening Offer | Rewards |
Chase Freedom Unlimited® | $0 | Up to $300 | 1.5%-5% cashback |
Capital One Venture Rewards | $95 | 75,000 miles | 2x-5x miles |
Capital One SavorOne Cash Rewards | $0 | $200 | 1%-10% cashback |
Wells Fargo Active Cash® | $0 | $200 | 2% cashback |
Citi Double Cash® | $0 | $200 | 1%-5% cashback |
Blue Cash Preferred® (Amex) | $0 first year, then $95 | $250 | 1%-6% cashback |
Chase Sapphire Preferred® | $95 | – | – |
Closer to premium credit lines, but still accessible to average Americans, can be considered rewards cards with cash back and low interest rates and no annual fee. In general, each type of card offers different benefits, such as travel and purchase rewards, while low-interest lines can offer 0% interest for 6 to 18 months, which is especially beneficial for large purchases or balance transfers. By the way, the annual fee can pay for itself in rewards and perks if the card is actively used. Forbes provides further insights on the best credit cards. In 2023, credit lines accounted for 32% of all payments. This is up from 31% in 2022 and 18% in 2016.
The choice of credit card is determined by criteria such as interest rate, length of grace period (interest-free loans), annual fee (if any), various bonus programs and cash back. When choosing a credit card, it is fundamentally important that the amounts you will be operating – borrowing, repaying and servicing – are within your financial means. Remember that money you borrow always has to be paid back. The only question is how much you have to pay for the service. And with a strategic approach, borrowing money can actually save you money and even yield profits.
Using credit cards wisely
The U.S. financial system is interested in involving every citizen in the U.S. economy. The interests of the parties involved extend far beyond economic processes, the ultimate goal of which is to build a sustainable economic system. In this construction, credit cards play the role of portals at the threshold of which the parties enter into mutually beneficial transactions, the key to which is information. Smart use of credit cards means minimizing debt and maximizing rewards. Led by the financial expertise of Rates.fm, we share the most effective strategies:
1. Pay off balances on time:
- Pay your bills in full each pay period (month, quarter, year). This way, you’ll avoid accumulating debt and paying late fees on interest-free loans. Automatic payment features in fintech apps can help.
2. Use the card for everyday spending:
- Pay for everyday purchases with your credit account – earn rewards for every dollar you spend.
3. Explore rewards programs:
- Choose a card with rewards that fit your needs (like cash back, miles or travel rewards).
4. Avoid cash withdrawals:
- Withdrawing cash from a credit account usually comes with high interest rates. Avoid them if possible.
5. Monitor your balance at all times:
- Don’t spend more than you can afford to pay back within the terms of your credit limit.
If you find yourself in need of cash, consider exploring cash withdrawal apps. This guide will help you choose the right app from the finance information portal, Rates.fm.
Optimize rewards
The full benefit of using credit accounts lies in their optional features. Consider this: by leveraging credit card benefits now and paying later, you open the door to earning rewards and even making money. Here are two potent strategies:
- Combine cards for different spending categories. For example, use cards that offer cash back on groceries and gas: as much as 6% on groceries and 3% on gas, but no more than $6,000 per year.
- Take advantage of bonus categories and seasonal promotions. These are special spending categories, such as restaurants, pharmacies, and travel, that have a seasonal tie-in. Opportunity to save as much as 3% year-round or up to 20% seasonally. There are restrictions, e.g. American Express® Gold Card – no more than 50,000 per year.
Regularly review the terms and conditions of your cards to optimize your strategy. By combining offers from different cards, you’ll get closer to financial independence.
Key takeaway
Think of credit cards as an opportunity to go beyond borrowing, not as a reference to debt. Imagine that every purchase comes with rewards, cash back or perks in exchange for the ability to wait. So using credit wisely can help you not only meet your current needs, but also improve your credit score – save, earn and manage your finances effectively. The rate of cardholders among families with annual incomes over $100,000 is 98%, compared to 57% among families with incomes under $25,000.
The key is to choose cards that fit your spending habits. The second is to be aware of promotional offers. And third, use them strategically. It will also help you avoid common pitfalls, such as high interest rates, in exchange for the ability to make a purchase here and now. Finally, waiting and seasonal rewards programs turn credit cards into powerful tools to help you achieve financial independence. Just let our guide at Rates.fm help you use your finances wisely, transforming yours everyday transactions into opportunities for growth.