- Use a credit card for every expense you can possibly charge.
- Use a card that gives you frequent flyer miles or some other benefit that you'll actually take advantage of.
- Only charge as much as you can pay off in full every month-- don't carry a balance.
I know this is controversial-- a lot of people caution against credit card use, saying that it's easy to go crazy spending money without seeing how it affects your bank balance. They'd rather use cash or debit cards, thinking this will keep them in control better, and for some people, that may be the right way to go. But if you can keep your expenses in perspective and not spend more than you can pay off, here's why it's a good idea:
-- you are basically getting a free short term loan for a few weeks, as no finance charges are due if you pay your bill in full every month.
-- you get a printed record of exactly what you spent your money on, monthly and usually a summary at the end of the year. It's harder to keep track of cash. Knowing what you spend your money on is the first step to being able to see where you can save.
-- if you use Quicken or another financial tracking program, you can set up online access and download your transactions right into the program.
-- if the card has a good rewards program, you can save a lot of money. I use a United Airlines Visa, and between credit card use and actual flights, I've earned enough miles for an average of one international round trip for each of the past 5 years. Some of this was based on business use reimbursed by my company, but that's at least $3000 or so that I've saved on airfare. My card has a $50 annual fee but it pays for itself!
Obviously, if you can't pay off the card every month, you should avoid using it, and if you have a credit card balance, you should do everything you can to pay it off, before the high interest buries you! When I was in my early 20s, I ran up a balance and switched cards a few times to take advantage of those "no interest on transferred balances for the first 3 months" kind of offers. But as soon as I had any cash, I tried to pay off the cards. I have known people who had built up some savings, and still carried large credit card debts. "But my savings are earning interest!" they'd say. It makes sense to keep some savings for emergencies, but you're probably paying 10 times more in interest on the credit card balance than your savings is earning, so just pay off as much as you can.