Tips on using credit cards wisely

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Tips on using credit cards wisely
We have all heard numerous stories of individuals over their heads with credit card debt - maxing out every card they currently own, then only being able to afford the monthly minimum payment. High interest payments shackle people to their debt for many years to come, not to mention the significant income drain the finance charges have on their families and loved ones.

It is very unfortunate that many individuals must live with this reality, since with some financial discipline, this delimma can be completely avoidable. When a well-documented spending plan is developed and followed, a credit card becomes no more dangerous than any other form of regular payment.

To avoid credit card fees and finance charges, credit card bills should be paid in full each month. With a little extra bookkeeping from a well documented spending plan, a credit card can be transformed from being a burden to a very good financial partner - since it provides the below mentioned advantages over other forms of payment:

Rewards Programs: Many credit card companies will offer you, the customer, a loyalty programs to reward for using their credit card. Rewards usually come either in the form of points or in the form of cash. Depending on the credit card company, the points can be redeemed for restaurant gift certificates, hotel stays, airfare, gas stations, vacation packages and more. Cash cards typically pay a 1% rebate on your purchases, which makes for an extra $240 a year on monthly spending of $2,000. This level of spending is easily accomplished by putting all your purchases on a credit card (including utility payment, electricity payment, cable company payment). Some cards like Discover pay more than 1% for particular types of purchases like groceries or gas.

A Perpetual 0% Loan: When you use a credit card offered by a credit card company, you are using the bank's money to pay the store instead of yours - for free. While you are waiting for your next statement to arrive in your mailbox, your money will continue to work for you in an interest- bearing account offered by your bank. Unlike a debit card that continually depletes your account balance, using a credit card preserves your entire bank account balance for earning interest until your statement's due date has arrived. That's an extra $35.25 a year based on a $1,500 balance at today's rate of 2.35%*.

Fraud Protection: If your credit card number is used fraudulently without your consent, by law your maximum liability is $50. This is not the case with a debit card. A perpetrator can easily use your debit card as a "credit" transaction in retail stores or online on the Internet. This type of transaction does not require a password or PIN number to be entered, and is especially dangerous since a thief can clean out your entire bank account in no time.

Loss Protection: When you lose cash, it is gone for goo. However when you lose your credit card, all it takes is a single call to your issuing bank and a new credit card will be sent to you. In the meantime, you are protected against unauthorized use by anyone who finds the lost card. The issuing bank will terminate your previous credit card for you.

Warranty Coverage: Many of the MasterCard credit cards warrant your purchases above and beyond that is been offered by the product's manufacturer. Your purchases made with one of these cards get an extra level of protection for free. See MasterCard's website for the full scoop on their coverage terms.

Purchase Protection: Purchase protection is another benefit MasterCard offers on most of their credit cards. With their Purchase Assurance plan, your purchases are automatically insured against damage or theft for the first 90 days, also at no additional cost to you and works very well in your favor.

With all of these benefits over other forms of payment, credit cards can easily become your favorite friend when it comes to paying. So instead of dreading your credit card bill every month, it can become a pleasant reminder of your money mastery.

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Tips on using credit cards wisely
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