Some folks are absolutely against credit cards because they feels it encourages folks to spend more than if they were using cash. They feels that without credit cards, many folks who are now in credit card debt would not have gotten into debt in the first place. I, am in the opposite camp. I use my credit cards all the time to earn reward points. I have always paid my bills fully and never carried any credit card debt.

Both camps though, agree on one thing. And that is that we should not get into any credit card debt. I’ll organize this post into the following. I’ll start by going over:

• The basics of sound financial management
• What not to do with your credit card
• How to save money with your credit card?

I’ll start by saying that to use credit cards responsibly, it really starts with getting the basics right in your personal finance life. So what are they?

1. Spending less than you earn – This is so elementary but it has to be mentioned over and over again. As long as everybody follows this rule, this country would not have the problem that it is having.

2. Budgeting – Unless you make way much more than what you spend every month, it pays to budget so that you know where does your money go. One of the things that you have to budget for are some leisure and discretionary spending. Many times, a budget is thrown into chaos because of things like an unexpected birthday party invitation and repairs on cars or house.

3. Making List – If you ask any coupon clipping Mom, she’ll tell you that without making a grocery list, you will go way over your budget by aisle 5! The key to sticking to your budget is to make a grocery list, get your coupons ready and then speed through the aisles.

But the same concept should be applied to everything that you spend on. For example, why make a list only for groceries? Why not do one for any major shopping spree? Whether you are buying clothes for the kids or for yourself or whatever, you could always make a list.

4. Know Your Real Needs Vs Wants – This is where I think we as a nation have failed. Over the last three decades, we have borrowed to consume. We have not put the borrowed money to productive uses. Instead, they went to things like “home improvement”, a second vacation home. There are nice to have, but not a real necessity.

We may need a cell phone, but do we really need the latest iPhone? We need a TV, but do we really need the latest Plasma 60 inch screen?

5. Develop and Set Your Financial Goals – Figure out how much emergency funds you need, how much you need to save every month in your 401k or IRA. Work out a reasonable savings plan. The plans may change but you should always have one.

6. Monitor Your Spending – This is the block and tackling in personal finance. It is boring, but it has to be done.

OK – you might wonder why did I have go through all of that as I was supposed to tell you how to use credit cards responsibly? Well, if you are not disciplined and follow the above steps, then there is no way you are going to use credit cards responsibly. Being financially savvy shows up in all other aspects of your life.

Now with that out of the way, let’s go through some tips on how not to use credit cards.

• Do not use your credit card at ATMs – Credit Cards allow you to withdraw cash at ATMs. But please never do that. You will be hit with a cash advance fee of about 3% (in fact, Bank of America has now raised that to 5%!).
• Do not be late – Never be late for your payment especially if you carry a balance (though both Brad and I will agree that you should never carry a balance). And if you are still on an introductory period of a 0% balance transfer credit card, then you’d better make sure you are not late or else your 0% will probably jump to 29%!

If you pay in full every month, the occasional lapse would probably not hurt you. A credit card company will only report you to the credit bureaus if you are late by more than 60 days. You may be slapped with a late fee and some finance charges, but if you have always paid on time, there is a good chance that they will waive it.

• Never go over your limit – you should always have a buffer zone. Never charge anywhere remotely close to your limit. This will ensure you will always have a good “credit utilization ratio”, which helps your credit score.
• Don’t be tempted by 0% APR offer for purchases – It still pisses me off to see ads on TV telling folks that you can buy furniture for “no money down” or get 0% financing for “up to 24 months”. Here’s the deal. If you cannot pay 100%, then don’t buy. Do not be tempted by these 0% for 12 months offer. It is the road that Brad says will lead to credit card debt (and he is right).

How To Be Savvy With Credit Cards and Save Money?

If you are being a responsible credit card user, then you have to take the step further and actually make money from credit cards. How? By simply getting a reward card.

For most folks, the best thing one can do is to actually get a cash back rewards credit card or a gas credit card. These cards allow you to earn cash rebates. Typically, a basic cash rebate card would allow you to earn 1% for every dollar that you spend on the card. But the better ones allow you to earn more than 1% (typically 3% to 5%) on things like gasoline, supermarket, restaurants, travel and even online shopping.

The trick to choose the card that will make you the most money is understand what you spend on your card. The first thing you have to do is to make a list of items that you charge to your card. a typical list would look like this.

• Gasoline
• Supermarket
• Drugstore
• Dining
• Travel
• Online Shopping

You then have to research the cards and their rebate formulas and determine which will save you the most money. It’s quite a tedious task, well worth it as it can help you save a couple of hundred dollars a year.

If you are more of a rewards person, most credit card issuers offer some form of rewards card that you can take advantage of. All of the major credit card issuers have reward programs. Probably the most famous program is the American Express Membership Rewards program. With reward programs, you can redeem points for the following:

• Airline Tickets
• Hotel Stays
• Car Rentals
• Gift Cards
• Merchandise
• Charity Donations

Most allow you to earn one point for every dollar that you spend on the card. Some programs have points that never expire. Some expire within about 5 years. But if you are the sort of person who pays in full every month, then using reward points to get an free airline ticket for a family vacation, or using it to redeem for an apple iPod for a christmas present is a really nice present for yourself.

Ending Words – I’ll stop here. For some folks, using cash instead of a credit card may work for you and make you less prone to getting into credit card debt. Do what works for you. But if you are not willing to give up using your credit card, then make sure you set up your finances such that you do not overspend or get into credit card debt, pay your bills in full and most importantly, choose your credit card wisely, save money and get free stuff from your card.

BankRate recently completed a 2009 Credit Card Survey that examined 20 credit cards and took a look at 14 key points in the agreement, including conditions, interest rates and fees. The study concluded that terms generally vary by issuer, not card, meaning that finding the right credit card issuer is critical.

When it comes to raising rates, the survey found that all credit card issuers will change some part of your terms, although some many be more leniant and forgiving than others. For example, Discover raises your interest rate if you pay late or go over your credit limit twice. USAA Federal Savings–a top lender–will only raise your rate if you miss your minimum monthly payment twice. In general, most credit card issuers will raise your credit card rates for any single mistake.

Universal default rates–also known as the “any time, for any reason” clause–is also very common. The banks that will always state that they can implement this at any time are Bank of America, American Express, Chase, First National Bank Omaha and FNB Omaha, and US Bank. If your credit card agreement makes mention of this clause, be aware that your APR may change at any time, whether you do anything wrong or not. Citi bank, on the other hand, doesn’t raise your rates unless you violate your terms, although they do review every account when it’s due to expire, often every two years. This means you should prepare around this time for a possible rate increase. Wells Fargo and Capital One are the only two credit card issuers that actually refer to the “universal default” by this name and what it means is they may raise your interest rates based on accounts you have with other creditors. Capital One does not practice universal default and Wells Fargo states that it only looks at your borrowing habits with the bank, not other creditors.

The average daily balance is another term to look at on your credit card terms and means that double-cycle billing does not occur. All of the top 10 card issuers that were examined in the survey used the average daily balance of your account when determining fees.

The survey also took a look at the average late fee range for the top credit card issuers and found that the lowest late fee is $20.70, on average. The highest? $38.50. When applying for or accepting a credit card, try to look for a card with fees that stay toward the low  end of the range to avoid a huge fee hitting your account the moment you’re late. Some credit card issuers, like USAA, have a flat rate late fee, sometimes around $35. Othe accounts have a range that’s assessed depending on your balance.

The average over-the-limit fee for the top card issuers is $32. Most issuers charge a flat fee, which is a high $39. Others have a tiered system based on your balance. USAA, on the other hand, has no overlimit fee because it doesn’t let customers go over their credit limit. If a transaction is attempted that will go over the customer’s limit, it’s automatically denied.

When it comes to balance transfers, the average is 3% of the amount with no limit. Bank of America charges 4%, Capital One 0%, and Chase will soon start at 5%. USAA caps the fee at $75 while AmEx and Wells Fargo cap at $99.

Almost all of the issuers in the survey charge to pay by phone, ranging from $12 to $15. Automated phone system payments also cost between $8 and $10. Thankfully, none of the banks in the study charge for payments at a local branch.

Lastly, the grace period of all the issuers in the survey ranges from 20 to 25 days. The grace period is the time you have to pay your balance in full before interest accrues.

To read more about the new study, go to Bankrate’s article summarizing the findings.

Bank of America’s Keep the Change

While this isn’t a credit card, it’s a program linked to your debit card that helps you save money by rounding up purchases to the nearest dollar and depositing the excess in your savings account. There’s no annual fee for this program and the limit is $250 each year, a part of which is matched by Bank of America, especially for the first three months. This program is ideal for Bank of America customers that already use a debit card frequently.

American Express One Card’s Savings Accelerator

This program, with an annual fee of $35 that’s waived for the first year, has an APR that ranges from 12.99% to 14.99%. American Express deposits 1% of your purchases with this credit card into an FDIC-insured, high-yield savings account that’s run by an affiliate bank. There’s no limit to the amount that is deposited. You also receive a bonus $25 when you sign up that’s deposited into your account. This card is great for people that spend large amounts of money.

Fidelity Investment Rewards Mastercard

This credit card has no annual fee and a reasonable APR. There’s a generous 25 day grace period and the card works like this: Fidelity deposits 1.5% of your purchases into a Fidelity retirement or brokerage account. There’s an annual limit of $1,500 and a small catch: you need $2,000 to open a Fidelity account and maintenance fees may apply to your account if your balance falls below this amount. This program is great for current Fidelity customers because the 1.5% reward is better than most credit cards and there is no tier system. The $1,500 annual fee is also very generous, meaning you have to spend $100,000 per year to hit it.

Fidelity Investments 529 College Rewards Card

This credit card has no annual fee and a moderate APR. The way it works is fairly simple: Fidelity deposits 2% of the purchases you make with the card into a Fidelity-run 529 account. The limit is $1,500 per year and operates in Arizona, New Hampshire, Delaware and Massachusetts. Here’s the catch: while the rewards are pretty good, they aren’t good enough to move your savings from another account, especially if you’re in a state that has tax breaks for 529 contributions. This credit card is best for Fidelity customers that are light or moderate spenders.

Citi UPromise Platinum Select Mastercard

This credit card has no annual fee and a low APR (which goes up very high if you default). Citibank deposits between 1-10% of your purchases into a 529 plan that you choose. Gas purchases qualify for a 2% rate while grocery and drug store purchases can be up to 10%. The credit card needs to be registered at UPromise to earn rebates. There’s a limit of $300 annually for regular purchases and no limit on select drug store and grocery purchases. The catch is the short grace period and very high default rate. To use this card effectively, pay your bills immediately and make sure you never miss a payment or say good-bye to your savings.

Stockback Visa Credit Card from MBNA

This credit card hasa a low APR of 9.9% with no annual fee and a generous grace period of 25 days. It has a tiered rebate system that’s based on monthly–not yearly–spending. You earn 0.5% for the first $1,500 you spend, 1% for the next $1,499, 1.5% for the next $2,000 and a full 2.0% for anything over $5,000 per month. All rewards are deposited into an investment account that you choose. There’s a monthly limit on rewards of $120 per month. This credit card rewards system is rather difficult because it uses a monthly spending system instead of yearly, and requires large amounts of spending to reach even the second level of rewards. If you spend small amounts of money, choose a different rewards card.

NestEggz Platinum Plus Mastercard from MBNA

This credit card, from the same company that brings you the Stockback card, is for retirement savings. NestEggz gives you 1% of the amount you spend on rewards that’s deposited into a retirement account you choose.

Citi Home Rebate Platinum Select Mastercard

Last is the Citi Home Rebate credit card, which applies 1% of your purchases toward your mortgage. There’s no limit on your rewards, although the grace period is only 20 days and the default rate is high. This card–while not earning the highest rewards–can give you a sense of accomplishment as you make extra payments on your home loan.

 Remember, rewards cards and cash-saving cards are only helpful if you use them correctly. Never carry a balance, make a late payment or use your card irresponsibly or you’ll find yourself throwing all of your “savings” away on interest, fees and more.

Step One: Find out which is more important to you– a high balance or a high interest rate. The best way to pay off your debt is to save money while you do it by avoiding as much interest as possible. If you have a credit card with a $500 balance and a 29.99% interest rate, it may be more urgent to pay than a $1,400 balance with a 8.29% interest rate. The reason is simple: with the smaller balance, you’re paying an extremely high interest rate and most of your monthly payment is going to the interest, not the principal. You can also take a look at the debt amount. The $500 credit card is much easier to get rid of than the $1,400, meaning you’ll be eliminating one debt sooner. Here’s another benefit: by paying the $500 account, you’ll have that much more money available each month to dedicate to the higher amount credit cards. In general, always try to pay the balance that is costing you the most money.

Secondly, find out how much you’re paying on each account. If payments are difficult to make on one account but easy on others, pay off the difficult card quickly to free up money each month. Find out how much money you owe and what you pay on each credit card per month. This will help you find out which card is hurting you the most each month. Then you simply need to target the most troublesome card and pay if off first to free up more capital to help pay off the other card.

Lastly, consider which type of debt is most important to pay off first. In general, credit cards have the highest interest rate with the worst terms. Loans like mortgages and student loans usually have the lowest interest rates. Car loans, on the other hand, can weigh you down with high interest rates and 5+ year terms. When deciding which type of loan to pay off first, look at how much money you’re paying each month, the total you owe, and how much you’ll pay in the long run (by figuring your APR). Chances are some loans are costing you thousands of dollars over a few years, while some may be costing very little. This is a great tactic to help you decide where to place your priority when paying off your debt.

When you have your priorities straight and have decided which debts to pay off first, write down your plan and put it somewhere you’ll consult frequently. Write down a detailed plan with how much you want to put down each month to pay off your debt, along with the accounts you’re going to tackle first. Prioritizing your debt is the easiest way to get control of your finances and get rid of your debt by taking care of the most troublesome and costly bills first.

There are plenty of tools online to help you set debt repayment priorities. The best way to figure out how much debt is costly you–and how quickly you can pay it off–is to use a debt calculator. Bankrate.com has a range of calculators to help you get a hold on your finances, including What will it take to pay off my credit card & The true cost of paying the minimum.

The first step to understanding how a small balance on your credit cards can help you is to understand what makes up your credit score. 35% of your FICO score is based on your payment history, meaning how long it’s been since a missed payment and how on-time you are. 15% of your FICo score is the length of your credit history,  meaning individuals that have just started using  -credit aren’t likely to rate high in this area. 10% of your score accounts for new credit, meaning any new credit or loan accounts you have opened. Another 10% is made up of the type of credit you’re using. Mortgages, car loans, student loans and credit cards all factor differently. Lastly, a full 30% of your FICO is made up of the amounts you owe on your accounts. These amounts are weighed against the amount of credit you have available to determine how you’re using your credit.

Another thing to realize about how your credit card use is reported is to understand the idea of reported balances. For example, people that charge their card limit completely each month but pay in full aren’t likely to have a good credit utilization on their report because each month their creditor will report as if the card has been maxed out. This is where small balances come in to play. Small balances can often be even better than a balance of zero, according to FICO. Although the difference between having a zero balance and a small balance isn’t great, it can pay off for individuals trying to increase their score quickly. The best way to use this benefit for yourself is to use your credit card to make a small, inexpensive purchase. Pay off the balance immediately–or when you receive your bill in the mail–to ensure you aren’t paying interest or forgetting to pay entirely. This small balance will be reported to the credit bureaus by your creditor and will help your FICO score while avoiding finance charges and interest.

Of course, this strategy won’t work miracles. The difference between a small balance and a balance of zero is very small, although it does exist. It’s also important to realize that the best thing to do for your credit score is to pay your bills on time, avoid accumulating debt, and wait. Still, this method is great for people that are looking for every point that can get to qualify for a low mortgage or loan rate. In general, the best thing to do is to always keep your card balances below 30% of the limit and make on-time payments for a dazzling credit score that will net you the best interest rates available.

One of the best resources for anyone trying to increase their FICO score is MyFICO.com, particularly the Forums. The FICO boards have helpful posts for understanding the FICO scoring method, as well as ways to qualify for credit and rebuild problem credit histories. You can also sign up for a free trial of of the FICO Score & Credit Report monitoring, as well as Score Watch and Suze Orman’s FICO Kit.

1. The Shell Saver Card
The Shell Saver card is a card that links directly to your checking account, allowing you to save money on every gas purchase without the use of a credit card. Any amount charged with the account is deducted from your checking account and shows on your bank statement. The Shell Saver Card is simple to get, requiring only an active checking account and no fees of any sort. The Shell Saver Card is one of a kind: Shell is the first national gas retailer to offer an option like it. Conveniently, the card can also be used for other purchases at Shell, like food and services, although you won’t receive a discount on these items. The Shell Saver Card works by automatically saving you 2 cents per gallon when used.

2. Shell Select Member Card
The Shell Select Member credit card is another great option for Shell customers to save money because it gives cash back on a number of purchases like car rentals, hotel stays and airline travel. You receive 10% cash back on all hotel stays at Ramada, Hilton, Holiday Inn and other hotels, in addition to 5% cash back on airline travel and car rentals booked through the Select Member Reservation Center. You can also save up to 50% at over 13,000 hotels. Along with other benefits like travel insurance, the Shell Select Member Card has a low annual fee of $25 and can be a great money-saving option for Shell customers that travel often.

3. The Shell Platinum Mastercard
Third is the Shell Platinum Mastercard, which earns 5% rebates on all Shell gasoline purchases. You can also earn 1% rebates on other purchases made anywhere else. Shell’s website has a useful calculator to help demonstrate exactly how much you can be earning when you use your Shell Platinum Mastercard. The Shell Platinum Mastercard is ideal for customers that faithfully use Shell to fuel up, allowing them to save potentially hundreds of dollars per year.

4. The Shell Fleet Plus Mastercard
Lastly, Shell’s Fleet Plus Mastercard is ideal for businesses that need to reduce their fleet fuel costs, allowing price reductions of up to 3%. Monthly purchases between $1,000 and $3,999 receive a rebate of 1.5%; purchases between $4,000 and $7,999 receive a rebate of 2.0%; purchases between $8,000 and $9,999 receive a rebate of 2.5%; and monthly purchases of $10,000 and over get a 3.0% rebate. This Mastercard for businesses also comes with plenty of money-mangement tools to help control costs like the Driver Report and Expense Summary Report. There’s no fee for the first year for the Fleet Plus Mastercard, although a monthly accounting fee of $10 applies if the purchases fall below $1,000. Balances are due in full each month for purchases made with the Fleet Plus Mastercard.

These three money-saving options from Shell offer something for each type of customer: the Shell Saver Card is great for people with poor credit or simply those that don’t want to use credit; the Shell Select Member Card gives customers the opportunity to save money on travel; the Shell Platinum Mastercard is for those that want to earn rebates simply on Shell gasoline purchases; and the Shell Fleet Plus Mastercard is aimed at businesses that are trying to reduce fleet fuel costs.

Click here for a full review of the Shell Credit Card.

Mint.com
By far the most popular money management website is Mint.com, recently voted the best online personal finance tool. Mint.com has over one million users and helps users create budgets while keeping track of credit card accounts, bank accounts, investment accounts and more. The Mint.com is very user-friendly and creates pie graphs to show users where money is going. It also keeps track of your personal debt-to-income ratio and reminds you when bills are due. The website also shows you spending patterns and gives you personal savings opportunities through partners.

Geezeo.com
This website is called the Weight Watchers of money by Boston Globe because of it’s amazing personal finance tools that are offered for free. The website has a social networking aspect that lets people share their finance experience with others. It also keeps track of credit card accounts, loans, bank accounts and more. With Geezeo.com, you can also set goals to reduce credit card debt because the website keeps track and shows a percentage bar to help you on.

Wesabe.com
Lastly is Wesabe.com, a social networking site about financing that has some of the best finance forums on the Internet. You can anonymously share financing information and follow other users, as well as give and receive advice. Wesabe.com also has features that are great for saving money, like the Cutback Tool which suggests ways for you to save money through your regular expenses.

These three sites are the top-rated and most used personal finance websites on the Internet and are great resources for anyone that’s looking to get a better grasp of their spending and saving habits, as well as for people that want to manage all their money accounts in one place.

Who doesn’t love to watch TV? I myself have tried out every channel and movie station available. But it turns out I was paying more than $50 a month more than I should have been, and that was for a basic satellite package! I love my TV, but I don’t think even I watch enough to justify that extra fifty a month, especially seeing as I don’t even watch half of the premium movie channels in the package. I knew there had to be a cheaper way to get the kind of shows and movies I wanted to see. And you know what I found out? There are some great alternatives out there that can save you tons of cash!

#1: Netflix

Okay, okay, so I talk about Netflix way too much, I can’t help myself, it’s just that good! HBO, Starz and Showtime would cost me an extra $50 each month, but I could sign up for Netflix for just ten bucks and get all the movies I could want right in the mail. Netflix also has a huge selection of movies and TV shows that you can watch online, right on your computer! The only drawback here is Netflix can’t offer the current season of a given TV show until it’s out on DVD. But hey, there’s a ton of websites out there that have up-to-date TV episodes.

Netflix also recently released its own hardware called the ROKU For $100 you can buy this device, it allows you to browse the Netflix library, rent a movie, and have it streamed directly to your television. Netflix and Microsoft even struck a deal together, and now you can stream Netflix movies to your TV through your Xbox 360!

Read our complete Netflix review.

#2: Rent from iTunes

iTunes has also gotten into the movie rental business. Unlike Netflix, which charges a flat monthly fee, iTunes charges per rental. If you only watch a handful of movies per month this is the best option for you, and it beats forking over more money than you ought to for movie channels. And with iTunes you can watch your rentals on your computer, on your TV (with Apple TV), your iPhone or your iPod too. You can even download TV shows for $1.99 each, but you might want to check hulu.com to see if you can watch the show for free first, before spending any money.

#3: Amazon Video on Demand

Amazon’s Video on Demand service works in a similar way to iTunes. Amazon Video on Demand If you’re already a member of Amazon.com their On Demand service will probably be easier for you to pick up, although iTunes definitely boasts a larger library.

Begin by understanding what will happen if you fail to make your payment, or make less than the minimum. You’ll automatically be assessed a late fee that can range from $10-$39. This fee will be added both to your entire balance and to your minimum payment next month. Because you’ve broken your credit agreement, you’ll also most likely be given the default interest rate, which can be as high as 29.99%. Your entire credit card balance may even become due immediately!

Absolutely the first thing you should do when you find yourself unable to make your minimum payment is to contact your creditor. You can try negotiating a lower payment, which is a great place to start. Tell them about your financial circumstances and explain your situation. If you’re having trouble with payments because of a job loss, divorce or illness, make sure you let them know. Many credit card companies have hardship programs that are designed to help people in trouble pay their balance. These programs usually include a lowered monthly payment and could even give you a temporary interest rate drop.

Of course, doing this will have side effects. Your creditor may see you as an increased risk because of your financial hardship and you may be hit with a higher interest rate. Because this is completely within their rights, make sure you understand what could happen when you try to negotiate with your credit card issuer.

Another option for many people is to consult with a credit counselor that they’re familiar with and discuss options for making payments and getting rid of debt. These counselors will take a look at your financial situation and help you understand why you’re having difficulties. They can also help you make plans to pay and give you a payment plan that works for you. If you decide to try a credit counselor, make sure you go with someone that’s reputable. There are many frauds out there because of the current economic climate so check with the Better Business Bureau if you feel uncomfortable.

Above all else, don’t ignore the problem. It will only get worse. Next month’s minimum payment will be even higher, you’ll be charged high late fees and most likely be hit with a high interest rate as penalty. Always start by contacting your creditor. Millions of people are having trouble paying their bills so they’ll most likely be willing to negotiate with you to avoid the account going to collections.

Here are some helpful resources to help you if you’re having trouble making your minimum payments.

Bankrate’s Debt Payoff Calculator
This calculator helps you form a plan to pay off your debt for good. It also demonstrates how much money you actually pay when you maintain a balance on credit cards and how long it takes to pay off debt when you only give the minimum each month.

Better Business Bureau
This website will help you find reputable credit conselors and debt consolidation companies.

How Bi-Weekly Credit Card Payments Save You Money
Find out how making two bi-weekly payments each month to your credit card company can save you hundreds of dollars, even though you’re paying the same amount.

Ways to Lower Your Interest Rate
Learn some tips to get a lower interest rate on a credit card.