Credit is very dangerous for certain people. If you don’t think you have the discipline to handle things the right way, then you might want to put this off for a while. Credit card debt is the worst type of debt you can have. If you have to start paying interest, you’ve lost the battle. Travel hacking involves never paying interest!
Here’s the right way to do this. You want to avoid maxing out your card as that could impact your credit score. At the same time, you want to avoid charging something and then paying it off right away. That is called credit cycling and the credit card companies don’t like it when you do that. The best way to handle a credit card is to only charge what you have the cash for. Wait for your statement to close. Then pay off your credit card in full on or before the due date. I suggest at least a day before. This way, you never have to pay any interest charges. You’ll be getting all of those perks and points for free (outside of the annual fee, if any).
Some cards have 0% APR for a period of time such as 15 months. You still have to make a small minimum payment but you won’t have to pay off the statement balance. If you really know what you are doing, you can take that money you were going to spend on the card and put it in a high yield savings account to earn the interest. Do this each month. Then, before the time period is up withdraw the money and pay off the card in full. Are you going to make a ton of money? No, but it is free money. However, if you really don’t have the discipline and organization to do this, don’t bother as you can get yourself in trouble here. Too many people spend all of their money and then when it comes time to pay off this card, they don’t have the money to do so. These credit card companies know what they are doing. Don’t fall into their trap.
As we’ll discuss in another post, organization is the key to keeping this all straight. If you have a lot of cards with all different payment dates you could wind up paying interest and late fees. Always know what you spent, what you have and when the payment is due.