Buy Like Buffett: Get the Most Out of Your Credit Cards

Credit cards are a powerful financial tool depending upon how you use them. If you use a credit card in the wrong manner then you can wind up in a whole lot of debt and paying huge amounts of interest each month. Failing to make these payments every single month will lower your credit score terribly. You can use credit cards however to your advantage and actually make your finances even stronger than they were before.

Here are a few tips on using credit cards to your advantage.

Sign up for rewards cards

Rewards cards are the only way to make sure that you get some sort of benefit out of using your credit card. You can get a number of rewards that you can use to do a variety of things from saving money on gasoline to getting free gifts. These free rewards can help you to score lots of free stuff that will save you from having to spend extra money to purchase.

Pay the full balance each month

I am not suggesting that you just make a payment each month. I am suggesting that you pay down the full balance every single month. Paying the full balance will keep you from having to pay money in interest charges each month. It is like getting an interest free loan from your credit card company every single month. Just be sure to check out the grace period so you know when the interest charges start accruing.

Keep your accounts open

Just because you don't rack up a lot of debt on your credit cards does not mean that you should close your accounts. Open accounts with high credit limits and little credit used actually help to boost your credit rating. Old accounts that you use just enough to keep them open work wonders at increasing your credit rating. Using your credit card to make a small $5 or $10 charge will keep your credit card account active and your score in the 700s.

Eliminating high interest debt

Credit cards are always thought of as high interest debt but never seen as tools to help eliminate high interest debt. Transferring your high interest debt to a zero percent credit card can make eliminating debt go a lot faster. Use the introductory zero percent APR to aggressively pay off your balances and reduce your overall debt load.

You can see how a properly managed credit card account can actually help to save you money.

Mark Riddix is the founder and president of New Horizons Financial Management, an independent investment advisory firm that provides personalized investing and asset management consulting. Mark is a regular contributor to Seeking Alpha and has written financial columns for Baltimore and Washington, D.C. area newspapers. Mark publishes his own financial blog, BuylikeBuffett.com and has written the book Your Financial Playbook.