How to use credit cards to your advantage

KJ: Knowing how to use credit cards to your advantage is a powerful financial skill. With so many credit card rewards programs out there for cash back rewards benefits, airline mileage rewards and travel rewards, we’ll help walk you through how you know what’s right for you.

Six credit cards

Create a list of your goals
As with most other items we talk about, put pen to paper and discuss what the heart of the matter is with your goals. Some considerations are:

  • Are you looking to leverage your favorite airline miles credit card, so you can send your family on trips periodically,
  • Are you yearning for cash back credit card rewards to put some extra money in your pocket?
  • Do you have a go-to hotel chain that you want to earn some hotel credit card points with?
  • Are you paying down debt and need a 0% credit card balance transfer for a period of time to help with your interest payments?

    The answer to each one will help direct you to what type of card may be right for you and your current needs.

    Evaluate your current credit cards periodically
    Our cards of choice have always been cash back credit cards, so I recently did a full analysis of our credit card rewards we earned last year based on what we spent and what cash rewards we actually earned. We use the Chase Freedom & Chase Sapphire cards for various expenses (with one card used exclusively for business expenses), but with rotating 5% categories, miscellaneous promotions, and changing terms, it’s a complicated mess to say the least on what you’re actually earning – thus my desire to calculate the cash back we earned on our credit cards for this last year! It’s been a long time since I actually calculated the figures, but when I calculated it all, I discovered we earned about 1.25% (without including a sign-up bonus of $400 we benefited from on a card we opened last year) when looking across ALL purchases…not too bad, but certainly room for some improvement.

    Consider changing credit cards if the results are disappointing or below your expectations
    There are definitely some better cards out there, so we’re currently looking to find what we can tweak to maximize these benefits even further for 2014 and beyond. One thing I’m considering is finding some of the specialty cards where you consistently earn 5% in a specific category (one for gas, one for groceries, etc.) to see if those might make sense for our spending. Plus, we have a couple cards now that served their purpose for a sign-up bonus and are now ready to be closed.

    Try to keep your oldest account active
    I have a tendency to get a little overzealous with new accounts sometimes, so it’s important to do a double take to ask yourself if the *potential* benefit is worth the extra time and energy spent in opening a new account, linking it to your Quicken or logins, etc. It’s not great on your credit score overall to constantly open and close accounts, but there’s a certain amount that can make sense. Particularly once you attain a certain level of your credit score, these changes make little overall impact (in my opinion).

    One good rule of thumb to keep in mind is to always look to keep your longest held credit card(s) open despite all the changes you’re making. Since your average credit length is a component of your credit score, the older cards help benefit your scores. However, it’s important to weigh the benefit against any annual fees and in light of your overall goals. It’s probably not worth the annual fee just to keep it open, so try to find a card without an annual fee or minimum purchase throughout the year. But, if you do need to keep the card active, consider just charging something as simple as toothpaste or an essential grocery from time-to-time to keep the card active/open.

    Avoid carrying any balance
    Despite all of this analysis, it’s important to avoid carrying a credit card balance at all. Use a cash flow system to help you track your expenses, so you can be empowered to really control your expenses from month to month and can avoid having a balance on any cards that is carried over. If you do end up carrying a credit card balance, say “goodbye” to the enticing sign-up rewards and the ongoing mileage/cash back/travel rewards as the interest payments are sure to eat up all benefits and more!

      Have you ever analyzed your credit card rewards?
      Do you have a preference for a rewards credit card?
      Tell us what you have done that works for your spending style and goals!

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    Four ways to reduce your banking fees

    KJ: We’re all looking for ways to save money on any unnecessary expenses or fees that can be avoided, and what’s more frustrating than a banking fee? Whether it’s a regular monthly fee or one-off fees that add up, you can find lots of savings by paying close attention to the rules your bank has for each type of account. There are lots of ways to cut these costs, and online banking is one of them. Depending on your needs, you may consider an account like Capital One, ING (now Capital One 360), or Ally, as they tend to be internet-based with both competitive interest rates and low fees. If you prefer your local brick and mortar, then consider the following items when reviewing how your current bank may have features that could help you reduce those pesky fees:

    Go paperless
    Whether it’s your local bank, international bank, HSA, 401(k), IRA, brokerage account, or mortgage, most have incentives to reduce paper statements. You can often get a discount on transactions, monthly fees, and other items just by going digital. And what to do if you no longer receive those nice monthly statements via snail mail? I have a USB drive that I use once per month to go download my statements and keep a copy. “My Passport” 1TB External Hard Drive is my personal favorite, but more budget friendly products with much smaller storage like SanDisk 32 GB USB Flash Drive will also do the trick. You never know when you will need to reference the statement and it helps keep them centrally located. You don’t necessarily have to download all statements each month (especially since some do quarterly), so try setting yourself a reminder to periodically go into your accounts online and get the statements.

    Search for no monthly fee checking accounts
    Now-a-days, there are options to not only avoid monthly checking fees, but you can even find accounts with interest-bearing features for their checking account. Many of the banks and institutions that offer those products are online-only banks. However, the way that we have managed around this is to:

      Select a bank that offers ATM fee reimbursements (so you can access an ATM anywhere regardless if it is a member ATM or not)
      Find a bank that has an app (iphone, Droid, iPad, etc.) that allows you to deposit checks electronically, so you don’t have to go to a branch location.
      Pair it up with a free checking account at another institution that is close to your home or office where you can deposit cash as needed.

    The bank that I have found that fits this criteria is Charles Schwab, but I know Fidelity has a similar checking account option too. For more information on available accounts and fees, go to Be wary of any introductory offers that would soon expire!

    Do the math
    As I’ve reiterated in posts before, do the math, do the math, do the math. Some banks waive the fee if you have a minimum deposit held with them. Depending on your particular situation and banking needs, calculate what you could be earning in interest each year to have that cash parked elsewhere in a savings, CD, or investment account and compare it to the ‘savings’ you have each month for the fee. Might be time to move banks!

    Pay attention
    Banking in particular is one part of your life that you should pay close attention. So many products and services can have hidden fee after hidden fee that it is very important to read closely when you’re looking to switch banks as well as read the letters they send you about potential changes to your terms and conditions. Only you can look out for your own interests!

      What do you do to avoid those pesky fees?
      Tell us about your struggles (or triumphs!) with bank fees.

    Four ways to reduce your banking fees is copyrighted by without consent to republish.

    Some of the links in the post above may be affiliate links. This means if you click on the link and purchase the item, we will receive an affiliate commission. We feel strongly about only recommending products or services we use personally and/or believe will add value to you, our readers. Read more about our commitment to providing quality product recommendations.