Today's Credit Card: A Financial Tool for Fun, Profit and Savings

Today's Credit Card: A Financial Tool for Fun, Profit and Savings

If you use credit cards as a financial tool rather than as just a means for credit, they can help you get that trip to the beach or plasma TV faster than you could have gotten it on your own…without depleting your savings.

You saw a great deal on the HDTV you've been eyeing, but you're still trying to put away money for a vacation to Florida. What's a savvy saver to do? If you find a credit card with a great sign-up bonus, you may be able to get both the TV and the trip to Florida without spending a lot of extra money. The key is finding a card that works with your spending plan and financial habits.

For example, the US Bank FlexPerks Travel Rewards Visa Signature Card offers new cardholders 17,500 bonus FlexPoints after the first $2,500 in purchases, as long as the $2,500 is spent within the first five months. It only takes 20,000 points to get a $400 airline voucher (with no blackout dates), so that HDTV or new entertainment center could put you well on your way to Florida. You also earn one point for every dollar spent and double points on gas, groceries and some cell phone bills. If you donate to money to charity on the card, you'll earn 3 points per dollar spent.  The card also gives you an additional $25 airline allowance with each award ticket to help reimburse baggage fees or in-flight meals. While there is no annual fee for the first year, card does charge a $49 annual fee thereafter and has an APR of 13.99 to 23.99%, based on your credit score.

As such, you shouldn’t open up a card like this if you don't pay off your balances in full; you should consider these cards to be a financial tool rather than a means for credit. That being said, there are some great deals to be had if you pick and use your credit cards wisely. If you are big traveler and you don’t want to worry about paying annual fees, you can always investigate a hotel-sponsored credit card, like the Citi sponsored Hilton HHonors Visa card. This card has no annual fee, gives you 40,000 Hilton HHonor points after you spend $1,000 within four months, and automatically grants you HHonors Silver Status. If you frequently stay in Hiltons, the HHonors Silver Status the card provides will automatically save you fitness center fees since the status gives you free access. However, you don’t have to use your points to stay at Hiltons: you can also use them for airline tickets, car rentals, or even on-line shopping. The standard variable APR for purchases is around 14 – 16%, so you should plan on paying off the balance in full every month if you don’t want the interest charges to offset your point earnings.

Your credit score could take anywhere from a 5 to 20 point hit when you apply for a new card, but if you pay your balance off in full every month your score should be back to the original level within a year. Because your credit can take a slight hit, this card strategy isn't recommended if you're preparing for a major purchase like a house. Then again, if you're saving for a new house, you probably wouldn't be in the market for vacations and home entertainment systems at the same time—the BestCashCow.com page on mortgage products and rates would serve you better.  

Image: Stuart Miles at FreeDigitalPhotos.net

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