We all know credit cards are great. In theory. But are they great in practice? Well, that's up to the user. Getting the most out of your credit card depends on you and your needs.

There's no denying credit cards are convenient. They are accepted worldwide. They calculate the rate of exchange for purchases in different countries. They itemize expenditures, which comes in handy at tax time. They insure purchases. They allow you to keep money in the bank earning interest. And many even offer bonuses, such as cash back or frequent flyer points.

At the same time, credit cards can be the cause of many financial head-aches. Huge bills, high interest rates, late payments. Well, there are some key factors to keep in mind to minimize your headaches.

Most importantly, remember that banks are competitive and are seeking your business. If you are unhappy with any aspect of your credit card account, you should call your bank and talk to them about it. This may seem too good to be true but if you ask, they will often oblige.

The first thing you should do is get rid of annual fees. There are too many credit cards available without an annual fee so if your card has one, call your bank and discuss it with them. Generally, they will remove the fee in order to keep your business. Occasionally, the bank charges an annual fee for certain services such as discounts at restaurants or hotels. If you've never used or never intend to use those services (which is usually the case), you should inform the bank. Often, they offer a card without those services and hence, without the annual fee.  

The second thing you should do is check your interest rates. Not all cards have the same rate so if you do not pay your balance in full every month, you want to make sure you are using the card with the lowest interest rate available to you.  

In that same vein, if you get an offer from another bank for a card at a lower interest rate, you should call your existing bank and ask them to match that interest rate. Chances are they will because they do not want to lose your business. Then you don't have to worry about transferring your balance to the new card. Sometimes however, there will be offers for such extremely low interest rates that your existing bank will not match it. Transfer your balance. Loyalty is great but handling your money wisely is more important. Be sure to continue to watch your interest rate after the introductory rate period has passed, sometimes it will be raised to an extremely high  

Another factor to be aware of is that some minimum payments due are lower than the interest/finance charge. That means if you only pay the minimum payment due, your bill will actually get bigger as the months pass, not smaller. Always check your statement to see how much the finance charge is for that month. Make sure you pay at least a few dollars more than the finance charge even if the minimum payment due is less than that.  

Aside from the obvious conveniences, most of us who use credit cards, use them because we can't afford the cash expenditure in full. We plan to pay it off over the course of months or years. But for those of you who pay your credit card bills in full every month, if you don't already do so, you should consider purchasing absolutely everything you can with your credit card and leaving your money in the bank for as long as possible where it can earn interest.

Keep in mind that Savings Accounts usually earn higher interest than Checking Accounts so you want most of your money in some sort of Savings Account such as a Market Rate Account. An important factor to consider however, is that most Savings Accounts allow only a certain amount of withdrawals per month, before a charge is incurred, whereas most Checking Accounts allow for unlimited checks and withdrawals. Plan wisely. You don't want to pay ten separate bills out of your Market Rate Account for instance, if it only allows for three withdrawals. Instead, transfer the appropriate amount from your Savings Account to your Checking Account to cover your monthly bills.  

Of course, the drawback to purchasing everything with your credit card is receiving a much higher statement at the end of the month. If this gives you a headache, then you probably shouldn't do it. The interest earned is not worth the stress. Remember, credit cards can make our lives easier. We just need to use them to the best of our individual needs.

	© Melt Magazine 2001