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When used strategically and responsibly, credit cards can be your ticket to upscale experiences, discounts on everyday purchases and lots of travel perks. They may also help strengthen your credit, leading to benefits like a potentially easier time getting approved for loans in the future—at more favorable interest rates.
One reason not to get a new credit card? To gain more purchasing power without making a plan to pay off your balance each month. Accrued interest charges, and the credit impact of a growing balance, will offset any advantages your new card offers.
But if you make only the purchases you can afford to pay off, here are a few reasons to seek out a new credit card this new year.
1. Take a Vacation at a Discount
With good or excellent credit, you may qualify for a travel rewards credit card, which allows you to earn points you can apply to travel purchases. Some credit card issuers, including Chase, also have their own portals where you can book travel, using points or cash, at a discount.
Opening a new travel rewards card often gives you access to a sign-up bonus if you spend a certain amount within the first few months. That means if a big purchase is on the horizon, like furniture for a new apartment or a wedding you're planning, you can make the purchase with your new card—and get rewarded for your spending.
The Capital One® Venture® Rewards Credit Card, for instance, offers 100,000 bonus miles, worth $1,000 toward travel, when you spend $20,000 within 12 months of account opening (or earn 50,000 miles, the equivalent of $500 in travel, if you spend $3,000 in the first 3 months you have the card). Shrewdly earning and using rewards can help you afford a more deluxe vacation than you could otherwise.
2. Upgrade Your Airline Experience
In addition to sign-up bonuses and points for spending, travel rewards cards can also come with unique features that can make your next trip more luxurious. Several credit cards give customers a statement credit toward the application fee for TSA Precheck, for instance, reducing the angst of waiting in the security line.
Some premium travel credit cards also offer memberships to Priority Pass, which provides access to airport lounges. Certain airline credit cards provide lounge access as a perk, too, which could mean the chance to enjoy free food, an open bar or a relaxed layover between long-haul flights.
3. Get Your Credit to the Next Level
If your credit isn't yet in good enough shape to qualify for a travel card, set your sights on a credit card that can get you there. Look into secured credit cards, which require a cash deposit that typically becomes your credit line. Since secured cards are typically for those new to or rebuilding credit, the deposit protects the lender from the risk that you'll make purchases you can't pay back.
A secured card works like any other credit card. But use it sparingly: Building credit is the goal of the product, and keeping your balance as low as possible will keep your credit score strong.
As you demonstrate you can manage credit appropriately, the credit card issuer may convert your secured card to a traditional card. Eventually, you can apply for a rewards card that gets you benefits like cash back or points for travel.
4. Add an Authorized User, and Boost Rewards
When you add an authorized user to your credit card account, you help a spouse, partner, child or another trusted person build their own credit. You're ultimately responsible for paying the bill, but their credit report will reflect the account's positive payment history.
You may be able to add an authorized user to your existing credit card account. But it could be more worthwhile to shop for a credit card with a rewards program that fits your lifestyle which also rewards you for an authorized user's purchases. As long as you can comfortably pay off your balance each month—with the authorized user paying for their purchases—you could both benefit this year from your credit card's perks.
5. Pay Down Debt, Potentially Interest-Free
Balance transfer credit cards are a powerful debt-reduction tool. They typically come with interest-free introductory periods of 12 months or more, which let you pay off debt without accruing extra charges.
You'll likely pay a balance transfer fee, which is typically a percentage of the transferred balance or a minimum fee, and you generally must move balances to a new credit card issuer. But if you qualify, and you commit to paying off your debt by the time the introductory period ends, you could make use of a valuable financial strategy. In some cases, you could get a balance transfer card that also offers rewards on ongoing purchases so that when your debt is paid off, you can continue to take advantage of the card.
But as always, keep debt in check by zeroing out your balance by the end of the month. That way, you can make 2020 the year when you make your credit cards work harder for you.