Be smart with credit

Credit cards can be a financial trap or a way to save money.

I recently participated in a fun contest that called for one-minute videos of personal finance advice. Well, the scope of the tips offered by 155 entrants was a reminder that many consumers of personal finance advice are just getting started.

So many basic tips that I have come to take for granted — use coupons to save, never pay just the minimum on a credit-card bill, take advantage of company matching funds for 401(k) plans — proved popular with consumers and contest judges at gobankingrates.com. My congratulations to the winners.

My submission, a hastily produced cellphone video that became a finalist in the credit and financing category, was what I would call more of an advanced-level personal finance tip. A one-minute video is not long, so I can go into greater detail here.

To paraphrase advice given to the lead character in “The Graduate,” I have one word for you: plastic.

People often have strong feelings about credit cards. For those paying high interest and struggling to pay off balances, credit cards are an evil financial trap. For those who never incur interest charges or fees because they pay off balances on time and in full, credit cards are an easy way to save money, because most credit cards rebate a small portion of the charges to the cardholder. My tip is primarily for that second group, but could be useful to anyone who uses credit cards. As long as your credit is good enough that you would be approved for a new card, there’s probably a better deal than the credit card you’re using now. This is not save-a-few-dollars stuff. I save about $500 a year by looking for better plastic.

Chances are, you cannot only find a card that will save you more (or charge you less interest if you carry a balance), but a card that will reward you with hundreds in cash or incentives for signing up. The last credit card I signed up for put $450 in my pocket. The one before that rewarded me with enough frequent-flier miles for two round-trip plane tickets.

Credit-card companies offer large incentives to get customers to switch. Some of those customers will end up carrying balances and paying interest, but credit-card companies make money from merchant fees when a card is swiped, and they want more customers.

If you have a credit card you like that doesn’t charge an annual fee, keep it, because part of your credit score is based on the length of time your accounts have been open, and another part is based on how much of your available credit you are using. If you have a card that charges a fee, look for a better one before that fee comes due.

Here are examples of good options I have seen this week. Note, the best offers are typically available to people with good or excellent credit scores.

American Express Blue Cash Everyday card has no annual fee, a $100 sign-up bonus (after charging $1,000 within 3 months), and cash back of 3 percent on groceries, 2 percent on gas, and 1 percent on everything else.

Southwest Airlines returns with one of my favorite deals: 50,000 Southwest points (worth $500, or about $700 in air travel) for signing up and charging $2,000 within 3 months. They have two cards. One has a $69 annual fee, the other $99. Limited time offer.

Business owner? The Chase Ink Plus card gives you 60,000 bonus points (worth $600, or more if used for travel) if you charge $5,000 within 3 months of opening and up to 5 percent cash back on office-related purchases. Limited time offer. $95 annual fee.

Carrying a balance? Paying lots of interest? The Chase Slate card has no annual fee, you can transfer balances to the card with no fee, and pay no interest on transferred balances and purchases for the first 15 months.

The bottom line: You can save a little every day by using credit cards wisely.

Reach David Slade at (843) 937-5552.