Using credit cards correctly does not involve paying either interest or fees. Therefore, when choosing a new credit card, the interest and late fee rates are not a consideration.
There is only one fee that should affect your choice.
What to look for
- Is there an annual fee? If yes, drop the card from consideration. Paying an annual fee whether or not you use a credit card is an unnecessary expense that adds nothing to how you use a card.
- Can you change the payment due day? This is important for aligning the credit card payment with one of the monthly days on which you pay bills in Income Companion. Having credit card due days the same as one of your bill paying days can simplify the handling of refunds and, more importantly, your credit card payments will be correctly planned and paid.
- Does the credit card company offer automatic payments? Setting an automatic payment equal to the statement balance is helpful for two reasons. First, when the credit card company is responsible for your monthly payments you will never pay a late fee. Second, paying the statement balance each month is how you avoid paying interest. In addition, the more automatic payments you have, paying your bills in Income Companion will be easier and quicker.
- How does the credit card company handle refunds? Most companies handle refunds as a partial payment if there is an unpaid statement. Otherwise, refunds are posted as a transaction that will appear on the next statement. This dual approach to refunds makes it harder for you to correctly handle refunds in Income Companion. Optimally, choose a credit card for which the company always posts refunds as a transaction to be listed on the next statement regardless of whether or not there is an outstanding, unpaid statement.
- Does the credit card company offer email statements? In addition to saving trees, reconciling email statements in Income Companion is easier than with paper statements.
- Would you know how to dispute charges? Reconciling monthly credit card statements ensures your information in Income Companion agrees with the credit card company's records. Of more importance is finding charges on your statement that you did not make or authorize. When you do not identify and dispute fraudulent charges within the allotted time frame, you become responsible for paying those charges. It is important, therefore, that you reconcile your statements each month in a timely manner. (In the United States, how to dispute invalid charges must be printed on statements. You will usually find this information in the fine print on the back of each statement.)
Using your credit cards correctly
Following the 4 step method in Income Companion for using credit cards is easy. Once the steps become habit, you will find that the time you spend correctly managing your cards is negligible compared to the interest and fees caused by handling the credit cards carelessly.
When used correctly, credit cards are a convenience that can simplify your life without the unnecessary stress and strain of dealing with debt.