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Saving Money with Credit Cards
Having a credit card is a wonderful convenience for those
times when you don't have immediate access to your cash. It can
allow you to purchase something on time for which you can pay
later, thereby giving you the ability to afford something NOW
that you'd have had to save for later. But buying on credit will
also cost you money - in that way it's no different than taking
out a loan to buy something that you want. There are, however,
ways to save money when you buy with credit cards.
0% Balance Transfers
One of the most common ways to save money with credit cards is
by transferring your balance from a high interest credit card to
one with a low or no-interest card. It's easy to illustrate your
savings there. If you are carrying a balance of $1000 on a credit
card that has a 19% APR and transfer it to one that offers 0%
introductory APR for 9 months and a 15.9% regular rate, here's
how your savings stack up:
Interest on old card for one year:
1000
x .19
$ 190 annual
$ 15.83 per month for 12 months
Interest on new card for one year:
1000
x 0
$ 0 per month for 9 months
$1000
x .159
$ 159 annual
$ 13.25 per month for three months
for a total of $39.75 for the year.
That's a total savings of $159.25 for one year.
You can, however, save the full $199 by paying off the entire
$1000 during the 9 month introductory period.
Save money on credit cards with lower interest rates
It's fairly obvious that you'll pay less in interest charges
if you choose a card with a lower APR, but before you jump for
the card with the lowest interest rate, take the time to figure
out your own buying habits. If, for instance, you tend to carry
no balance or a very low balance from month to month, a low
interest rate matters far less than say - a good rewards or cash
back program, or no annual fee. If, on the other hand, you carry
a balance from month to month, the APR is the biggest determining
factor in how much your credit card will cost you.
Just as an example, if you generally carry less than $100 on
your credit cards from month to month, even an interest rate of
19% only works out to $19 a year, or $1.58 per month. In that
case, it makes little sense to choose a credit card that offers a
10% APR with a $29 annual fee.
On the other hand, if you carry a $500 balance from month to
month, you'll pay $95 in interest for the year at 19% - but even
adding in a $29 annual fee, you'll only pay $79 for the year at
10%.
Don't just assume that the lowest interest rate is the least
expensive card. Do the math - and save money with your credit
card.
Save Money with Your Credit Card Rewards Program
Cash back and reward points programs are another way to save
money with your credit card. If you use your card often but still
manage to keep your balance low, you can save 1-5% on purchases
that you'd make anyway. Many cards these days offer 5% cash
rebates on any purchases made at gas stations, convenience stores
and supermarkets. In many cases, those rebates are applied
directly to your bill. If you purchase your groceries with your
credit card AND PAY THE CARD OFF immediately, you'll end up
saving 5% on your grocery bill all year long.
Joseph Kenny is the webmaster of the credit card comparison
sites http://www.credit-cards-info.com/
and also http://www.creditcards121.com/
MORE RESOURCES:
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