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Credit cards: To the Max

August 8th, 2012 · blog, Guest Post

Credit Card

If you’re like most Americans, you’ve got several credit cards stuffed into your wallet, and you make high-interest payments on them every month. But there’s absolutely a better way. How about getting the credit card companies to fatten your bank account?

Move your money–but don’t pay for it

You can definitely save a bundle by transferring your balance from one credit card to another. But beware, as always, of the fine print. A host of cards offer zero percent interest on transferred balances for a year or more, but they also charge an up-front fee to do so. Those fees are typically three percent; that’s $300 to transfer $10,000. It doesn’t matter whether they call it interest or a fee–the bottom line is the same: You’re still paying to move your money. Look for a cards like the Chase Slate card (check for current terms), which doesn’t charge a fee for balance transferred in the first 30 days you hold the account.

Push your points to the limit

The value of points runs the gamut: “buy” a TV with your points and they could be worth as little $2.50 for every $1,000 you’ve spent; go with airline tickets and those same points can be worth more than $10. The key is to do the math before you convert your points to cash or merchandise. For example, a recent search for two Starwood-owned hotels in Pennsylvania with points earned on an American Express Starwood Preferred Guest card showed a cost of 3,000 points for a room at one hotel; it was 7,000 for another. But both rooms could be reserved independently for about $200. The lower point offer equaled a value of 66 cents per point; the other equaled 28 cents.

Don’t pay until you have to

If someone you didn’t know loaned you $1,000 and told you they wouldn’t charge you interest if you paid it back in 45 days, the best financial advice would be to take the money, invest it in a high-yield savings account, and wait until “day 45” to pay it back. That way, you’d earn interest on the money while paying nothing in interest to that generous stranger.

My advice: consider the credit card company a generous stranger. Every billing cycle, you don’t pay any interest on new purchases if paid by the due date. So use your cards as you would cash (i.e., don’t spend what you don’t have) and pay at the last possible minute. But don’t make the mistake of missing a payment–the high-yield interest is relatively small compared to that hefty late fee you’ll be paying.

Never say “no” to cash

Cash-back cards offer some of the best deals in the credit-card world, but some are definitely better than others. Find a card that pays more than the usual one percent and you are on your way. Typically, the higher payments come from purchases made for everyday items like gas or groceries. Often you have to register for these special deals, so make sure you check your site for membership details.

Shop for deals with your card

You can save as much as 10 percent when shopping through your credit card web site. That’s because the card companies often negotiate special discounts and pricing for their members. One such program–Bank of America’s “Add It Up”–has partnered with retailers like Apple and Sephora. All it takes is a few minutes to sign up online.

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Matthew Malone writes for the leading Roth IRA and online retirement planning resource, RothIRA.com. He is a CBS SmartPlanet contributing writer whose work has appeared in The New York Times, Cosmopolitan, Smartmoney.com, Fortune.com, Forbes.com, and other publications.

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