Play your (credit) cards right for big rewards

Once upon a time the only thing a credit card was good for was charging something you’d pay for at the end of the month. But credit card perks have grown. So too have the risks. Your credit cards can earn you points and save you from carrying cash, but they can also cost you big-time if you don’t play your cards right. Here are four costly mistakes:

1. Chasing points while you carry a balance. I’ve met people who are so enamoured with the points they get on their cards that they don’t give a second glance to the horrendous interest rate they’re paying on their balances. Credit cards with the most bells and whistles also tend to come with the highest interest rates. If you’re not paying your balance off in full, those points are costing you mega-bucks.

2. Not reading the fine print. The ads say you’ll earn 5% back, but there’s an asterisk. If you bother to look at the fine print you’ll see there’s a limit. Have you figured out how much you’ll have to spend on the card to cover the annual cost of having the card? How much money actually goes into your pocket before you hit your fine-print limit?

3. Getting trapped by instant discounts. You’re at the checkout with $500 worth of merchandise. The cashier says, “If you open credit card account with us today, you’ll save $50.” What’s not to like? Hey, if you’re going to carry a balance, the interest rate, for one thing. Or how about the fact that the credit card limit you’re offered will affect your other borrowing limits? Or the fact that another form of credit on your credit history may not be the best thing for your credit score? If the store can afford to knock 10% off the price of everything you just bought, you can bet your bottom dollar that it’s going to recoup it in interest and fees.

4. Failing to redeem. The points pile up. You plan to use them to travel, but the restrictions make it so inconvenient. Or you plan to redeem for groceries, but standing there holding up the line while your cashier (and all the other customers) glare at you for using the coupons makes you cringe. What’s the point of gathering all those points if you never turn them into cash? Use them up, and take the cash you would have spent and send it to your savings. Now you’re a winner!