Key to Credit Card Success: Pick the Right Credit Card for Your Spending Habits

Here's a very unique piece from USA Today that gives some great suggestions on credit card use. Here's the bottom line of what they advise:

Choosing the card that best suits your borrowing habits can improve your credit card experience.

Not only that, choosing a credit card that best suits your borrowing (or charging) habits can help you maximize the rewards you earn from credit card. But more on that later, I'm getting ahead of myself.

The piece also says that a recent J.D. Power study divides credit card users into two categories:

• Transactors. These are people who usually pay off their balance each month. These folks tend to be more satisfied with their credit cards than are card holders who carry a balance. Because transactors don't have to worry about interest rates, they tend to look for cards that provide the best rewards, Taylor says. That makes sense: If you don't pay interest on your credit card, any rewards you receive are gravy.

• Revolvers. These are folks who typically carry a balance on their credit cards. If you fall into this category, forget about rewards programs. You can't afford them. Your best bet is to pay off your balance each month. But if that's not possible, look for a card with a low interest rate and no annual fee.

Here's my take:

1. If you carry a balance, you need to get your finances in order and control your spending so that you get out of this cycle. It's a VERY BAD financial move to carry a credit card balance and no one reading this post should be doing it (or at least you should be working on a plan to get out of credit card debt.)

2. I am all over the "use credit cards to earn rewards" idea. I never carry a balance, but I do have a couple cash back credit cards that I'm working with to give me the most cash back I can possibly get. Last year I earned almost $500 on my cash back credit card, this year I'll earn more than that and next year I expect to blow the roof off my earnings with a hybrid charging plan.

3. The key to maximizing your credit card rewards is to match where you spend, how much you spend, etc. with a reward you like (cash in my case.) Then look at all the alternative credit card offerings to see how you can get the most rewards based on your situation.

The article also gives some good advice for those who do carry a balance (while they are working to get themselves out of the debt cycle):

Card holders who carry a balance should also consider cards issued by small banks and credit unions, Daugherty says. These lenders don't have big advertising budgets, so you have to do some research to find them. But the payoff is often lower fees and interest rates, he says.

Comments

[Zook]

I have been a Citi Card carrier for going on 6-7 years and typically pay my bill on time [used the card to carry a balance for education].

My question to the forum is....Has anyone used the Sharebuilder rewards card and has anyone had any success with a card simular to Sharebuilder that gives 1% back into your brokerage account?

God post! Credit cards and how they work is so key to the world we live in.

[GeekMan]

Using the CC's that maximize your potential returns based on your spending habits is key. For example, I recently switched to using an Amazon Card for all my personal purchases because my normal purchasing habit is to buy almost everything I need through Amazon. Books, games, CDs, software... everything. Since I don't carry a balance on the card I manage to earn a $25 gift card on a monthly basis that I can spend on things I was going to buy anyway. And with their usually low prices, no shipping charges and no taxes on anything I buy, I sometimes feel like I shouldn't keep the $25 gift card.

But then again, there is that new XBox 360 game I've had my eye on... ;-)

[FMF]

Zook --

I haven't used that particular card, but a 1% return is pretty low.

[Kelly]

I use the Sharebuilder one. I like it, because I don't spend that much before you earn something, it is simple, and it is cumulative. Once you have charged $2500, they deposit $25 in you account. No vouchers to deal with, etc.

[Zook]

Thanks Kelly...

FMF....I guess 1% is low... I just like that it is sent not in a gift card or anything to painful. The sharebuilder card doesn't have any yearly fee and its on all purchases with no silly requirements.

I must admit, I am new to this whole reward card strategy. I'll continue to learn and hopefully pull the trigger soon to get something back :o)

[Kelly]

Oh, and if you would really rather spend the $ than invest it, you can transfer it right out of the Sharebuilder Money Market Account into your checking account without any kind of fee. I prefer to let it accumulate in the account and then invest it in an index fund once I have accumulated $250 in the account. Good luck!

[Fitness nut]

Great article. The other thing you should watch out for are cash back rewards programs that have a bunch of rules and regulations. Hello! Can anyone say frequent flier miles that can RARELY be redeemed.

I got my credit card through Lifespring Health. It's a visa. I'm a fitness nut and if you go on this website you get rewards points by using the card (can also shop online and get points!)

The rewards go to health and/or fitness services/products. All you have to do is turn in your receipt. I've used it for gym memberships, messages, medicine, dr. copay...you name it. PERFECTO for the fitness nut!

Check it out. It's a gem!