Credit Card Secrets: 3 Great Tips for Using Your Debt
By Christina M Thomas
Much like other financial investment vehicles, credit cards have a bunch of "secrets" that the average consumer never learns to take advantage of - and the companies like it that way. Indeed; if more people knew about and used these; lending via credit as an institution would eventually cease to exist as the margins shrunk.
In the following, we'll uncover a handful of credit card secrets, so as to better position you to be able to take advantage of the many ins-and-outs of these ultra-competitive lenders. In just three tips, you'll learn how to utilize credit cards in ways you might have never thought of.
Tip 1: Get Cards with a Beneficial Rewards Option
This may seem obvious. But the truth is, far too many people obtain credit cards that have rewards which don't really apply to their lifestyle. After all, if you hate the cold, then what good is it to get a trip to Moscow as an end-of-the-year reward?
With this in mind, when you get a card that provides you with frequent flyer miles; make sure you don't pay cash for things such as groceries, department store purchases or even gas - put it on your card!
Of course, in order to truly take advantage of this offer, you must avoid carrying a balance - head to your house and pay off the purchase right away. Then, the credit card companies don't get to take advantage of the interest, but still, of course, have to pay out the promised rewards and points.
Fact is; this only works out so well for them because the majority of people carry their credit balances from one month to the next. Many people every year take advantage of this and get free trips to Europe or Canada, etc, at the end of the season, for their entire family. You can truly rack up the frequent flyer miles with this disciplined approach.
All card companies love it when you carry a balance - this is, after all, how they make money. If everyone followed this tip, then the companies would have to close down because they'd go bankrupt and couldn't fund their operations.
Tip 2: Put All Business-Related Purchases on Credit
This next credit card secret involves some really high-level, bankers-type knowledge; as such, we'll use an example of how to take advantage of it. Let's say you want to purchase repairs on a home; it will be difficult to get a loan in the post-2008 housing collapse market.
There's no way that lenders want to risk shelling out money after the subprime mortgage collapse, which happened, after all, because they sold loans to people that couldn't pay them back.
So what do you do? Put the repairs on a credit card. Even if this card has a 12% APR, if you borrow $50,000 or so, and hold it for just a couple of months, then you actually only owe 2% on the total amount if you pay it back.
Of course, in order for this to truly work, you need to be in the business of flipping homes. In short, you'll be paying a tiny fraction of the usual amount needed to fund business projects with the necessary capital.
Tip 3: Use Multiple Lines of Credit Wisely
If you're like most people, then you've probably got several credit cards, right? If so, then you can use the competition that exists between bankers to your advantage with this next credit card secret.
First off; ask your bank if they've got a balance transfer option available. If so, make sure it's a zero-percent balance transfer. For example, if you have a balance on a Capital One card, and then you sign up for a Bank of America card, then either email or call them regarding the terms of their balance transfer offer.
If it makes sense, then pull the trigger and move your debt. Plan to pay it off fully within the next 6-9 months (usually) to come out ahead.
Obviously, if a bank can get you to transfer your debt from the competition to their own coffers, then they get you to pay the interest on that debt for a long time. This means, in order to sweeten the deal, they often give you several months free of interest on that debt. It's literally like giving away money!
So if you move your debt from one lender to another, receive a 9-month reprieve on interest payments, and manage to pay off your debt in those nine months, then you've effectively received a free loan from your new lender.
Using Credit Cards Wisely
In conclusion, especially with the last "secret", you can move your debt from one bank to another for a period of several years! You'll save the equivalent of several years' worth of taxes on a sum that's large enough if you manage to finally pay off the loan within the reprieve period.
Keep in mind that all credit card companies are in competition with each other; in the free market, this means they make the most money by providing the consumer with the better deal. Take advantage of it!