When I was a student, I can still remember how often I heard that credit cards were bad. Most of the times, they are, especially when you’re young and have about no personal finance experience or knowledge. Many are tempted to see their credit card as “free” money… paid the hard way afterwards. Let me tell you a little secret: Using a credit card to save is possible! It’s actually for me one of the best ways to pay for about all my expenses. Let’s have a look at the advantages of this method.

Look for Rewards

There are plenty of rewards credit cards. Some offer rewards like flights, gifts, etc. Others will give you cask back rewards. These are my favorite. Usually, you can get around 1% cash back on all purchases made with your credit card and up to 5% on specific items such as gas, drugstores, etc. I usually use this cash back once a year for our family vacations. If you have a mortgage, you might want to consider using your cash back as extra payments on your loan. Taking this habit can save you a lot in interests on the long run.

Stores’ Credit Cards

If you have a good rewards credit card, there’s no real advantage into subscribing for a store’s credit card. However, it can be advantageous to look in through. For example, if you do your groceries at Walmart along with many other products on a regular basis, it could be a good idea to register to its credit card and earn 5% on in-store purchases while your regular rewards credit card only gives you 1% cash back in the same store. Make sure to not hold too many credit cards at the same time though or you could easily loose track of your expenses and monthly bills.

Building a Relationship with your Bank

Using your credit card will also indirectly save you money by creating a relationship with your bank. If you pay your entire bill each month, chances are that your bank will most likely give you lower rates on future loans, line of credit, mortgage, etc. Simply put, the bank will be more likely to lend over to you if you have a good credit score, which you can build at young age by smartly using your credit card.

Money Protection

Credit Cards almost always come with money protection that can’t be denied. Should you get your wallet stolen or in case your a victim of online fraud, many credit cards company will give you a free protection plan. Headaches and money saved again! 😉

As you can see, there are numerous ways to save money while using a credit card. It’s only up to you to manage it according to your needs. Taking a low limit rewards credit cards can surely help you keeping things balanced while still saving money.

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Mike, aka The Dividend Guy, authors The Dividend Guy Blog since 2010 and manages portfolios at Dividend Stocks Rock. He is a passionate investor.