Living on credit is a bad idea, but that's not the same as saying it's bad to use credit cards.
About 60 percent of Americans use their credit cards to get some sort of rewards -- leveraging their own purchases to save money on everything from air miles to electronics.
"It is definitely worthwhile to shop around for the best rewards card to suite your needs," Amber Stubbs, managing editor of CardRatings.com, tells The Stir. "Otherwise, you will basically be throwing away money.
Here's how to make them work for you.
1. Go for the Cash Rewards. You know what you're getting, and these usually don't carry an annual fee. Be aware, Stubbs says, that many reward points cards offer cash back for points. "However, they usually devalue your points when you redeem that way or in some cases the actual value will depend on how many points you are redeeming."
2. Check the Fees. Anything with a high annual fee should be avoided -- they're not worth it for the average consumer. Also be aware award cards usually carry higher APRs, which will offset any rewards you earn if you're the type to carry a balance.
3. Shop Around. If you're not going for the cash rewards, find the card that meets your needs. Like to travel? Find a card that offers airline or travel rewards. Be aware too of whether the card offers special incentives for spending at different types of establishments.
"For example, you could have one card that offers bonus rewards on gas and one that offers bonus rewards on travel and restaurants," Stubbs says. "Then you would be sure to do all spending in those categories on the appropriate card."
4. Don't Let Credit Legislation Scare You Off. "With the credit crunch and impending CARD Act, most major issuers significantly scaled back their rewards programs for new and existing customers (among other things)," says Stubbs. "However, we have noticed many issuers ramping their rewards programs back up this year -- even as portions of the CARD Act are becoming effective."
5. Keep Your Other Card. Canceling a credit card in order to get a new reward card can hurt your credit score. If you can't handle the responsibility of two cards and expect to have revolving debt, the rewards card probably isn't the best option for you anyway.
Do you leverage your cards for rewards?
Image via Andres Rueda/Flickr