Be Plastic Smart: How to Save Money on Your Credit Cards

By: Jamie Jefferson

We Americans love our plastic. The average American has four credit cards, combined to provide access to about $19,000 in credit. We use them for everything from buying groceries to paying our utility bills to fulfilling our church pledges.

And all that credit can really cost us: Credit card companies made $43 billion from such charges as late payment fees, over-limit fees, and balance transfer fees in 2004 alone. (That's according to CardRatings.com)

But if you use your cards wisely, your use of plastic can help you save money and even help you earn bonuses. Here are four tips for being smart about your use of credit cards.

1. Make sure you have the best card for you and your family. Find the credit card that will give you the best interest rates, as well as the rewards that you need. About 60 percent of credit cards on the market today have some kind of rewards feature, whether it's airline miles, cash back, money for your child's college fund, or points toward merchandise at your favorite stores. If your card isn't offering you a premium of some kind, it might be time to shop around. Just make sure to also keep an eye on your interest rates and the other fine print before you make a switch or add a card to your wallet. Do your research on this before you make decisions because you don't want to be applying for a lot of cards or switching balances around too much.

2. The best way to be a smart credit card user is to not carry a balance on your card. If you don't keep a balance, then you are able to take advantage of the convenience your plastic offers as well as the card's rewards and premiums without paying anything in interest charges. Studies show that, on average, about 39 percent of Americans do pay those cards off completely each month. That's smart credit card use.

3. If you do carry a balance at any point in time, make sure your interest rate is as low as it can go. All it takes is a simple phone call to your credit card company to see if they'll lower your rate. If you have recently received an offer from a competing card, mention it to them to see if they can match it.

4. Don't go nuts with cash advances. Unless you are faced with a genuine emergency, it's a good idea to avoid using the cash advances that your credit card may offer. It may seem like easy money, but the fine print will often reveal additional charges, fees, and stipulations. Plus, it's an easy way to run up your balance beyond what you can afford to pay in the near future. Make sure you are well versed in all the fine print that your credit card offers.

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