With the huge number of credit card providers and different deals available to the average Fool, it is hard to know which option to choose (if any) and how to maximise your credit card value – until now.
How do credit cards work?
Credit cards give the holder the option to borrow money in the short-term from the credit card provider, which is usually a bank or other financial institution.
Credit cards can be a great way to level up your finance game, it's important to know when and how to use the cards, and just as importantly, where the best value is in cards.
In my personal experience, I've found that having a credit card rollover strategy of 1-2 per year can provide me with the significant sign-up benefits on offer from multiple providers while minimising annual fees and damage to my credit score in the long-term.
With so many options available on the market, it's useful for first-timers to use a credit card comparison website which will often give you a whole range of rewards programs, sign-up bonuses, as well as the important terms and conditions including interest rates, payback periods and restrictions on card usage.
How do you maximise your credit card value?
While forward credit can be extremely useful and I think should form part of a sophisticated personal finance setup, there are things to consider such as your credit score, your capacity and willingness to take on a line of credit and the minimum spend on each card.
I've found the best way for me to use the cards is exactly like my other debit cards, where I only spend within my means and transfer the money immediately when I spend it.
Depending on the card, this can buy you an extra 30, 60 or 90 days with your money which can be invested in a savings account to earn 90 days-worth of interest on that money that you would otherwise forgo, or simply provide you with additional security/creditor priority when booking big-ticket items such as that next holiday.
I like to calculate value based on rewards points per dollar spend required (including fees) which provides a standardised measure of value across providers and also is easy to then calculate your breakeven point (i.e. the point at which you'd be better to just keep your money and buy the flight/hotel you had your eye on anyway).
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