I read your column about strategies for lowering your credit-card rates. Isn't it even better if you don't carry a balance at all?

It sure is. Although many credit-card companies increased their rates recently (see Coping With Credit-Card Rate Increases), the rates don't matter if you don't carry a balance. In that case, you can shop for other features instead.

David Schechter, a reader in Wilmette, Ill., has a great strategy. "I treat my credit cards as though they were debit cards," he says.

He keeps track of his credit-card charges throughout the month on a financial spreadsheet and makes sure he always has enough money in his bank accounts to pay the bill in full when it comes.

Because he never carries a balance, "I never consider the credit-card interest rates when I acquire then," he says. "I look for rebate programs."

His favorite type of rebate is cash. “Beware of ‘points' because these can be easily devalued by simply raising the ante to obtain the same reward that required fewer points a year ago,” he says.

He has several cards to meet different spending needs -- and to make the most of a variety of rebates. He uses a Discover gas card to get a 5% rebate on gasoline purchases. He and his wife use the Chase Freedom card for buying groceries and receive a 5% rebate on groceries and pharmaceuticals.

"This year we have received over $900 in cash rebates and have about $200 more pending," he says. "We did this without paying a cent in credit-card debt."

And he just started using a Chase Professional MasterCard, which provides a 3% rebate on all purchases made at office supply stores -- and will be quite valuable when his wife buys a personal computer soon.

Kiplinger's recently named the American Express Blue Cash the best cash-rebate card, which provides a 1% rebate on everyday spending, such as gas, grocery and drugstore purchases, until you reach $6,500, after which you earn 5%.

We also named the BP Rewards Visa the best gasoline card, which provides a 5% rebate on gas you buy at BP stations, and 2% on airline tickets, lodging and rental cars.

Also see The Right Rewards Card for a no-fee card that can be used abroad without charges and earns airline miles.

When shopping for a rebate card, be careful of fees, which can eat up a lot of the rebates you receive. None of the cards listed above carries an annual fee. And you don't need to worry about the interest rates, as long as you're like David Schechter and pay the bill in full every month.

See Pocket the Best Credit Card section for more information about finding the best card for you, and our Search for Cash-Back Cards tool for details about several cards that provide cash rewards (you can also search for other types of rewards cards). And see the Kiplinger's 2007 Best List for Kiplinger's favorite picks in credit cards, investing, saving and spending.

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POSTED BY: Mahesh (December 10, 2007 12:13 PM)
I take advantage of the cash back rebates with several cards. But of late I have found that some cards with "no preset limit" have hurt my credit rating because the card companies do not report the credit limit for such cards. To the Credit Bureaus it appears you have maxed out on such cards. I won't go into the detail (search for "no preset limit" and you will see articles on bankrate.com) So the point is make sure you do not take advantage of the reward while screwing up one's credit score

POSTED BY: Randy (December 10, 2007 03:22 PM)
Using rewards credit cards and treating them like a debit card is truly the way to go. My wife and I put everything we possibly can on our AAdvantage card and have gotten free flights to Hawaii and New York in the past year and a half. We paid zero interest because we pay it off every month. All of the things we put on the card are things that we will spend on anyways, so why not take advantage of the system?

POSTED BY: abcgg (December 12, 2007 11:31 PM)
Reading the posts reminds me that some insurance companies up your annual premiums if you open more credit card accounts? Have you found this to be true? Mahesh mentions that it hurt their credit rating... How often should one check their credit rating. I only check once a year. We use a VISA that earns points toward all types of travel. Cash back makes more sense. Thanks for the article.

POSTED BY: Jeanne (December 28, 2007 03:08 PM)
I love cards that give cash back! Another tip- when redeeming your cash back that you have saved, look for ones that give you more for your money if you receive a gift card. Discover does this. In redeeming $20 in cashback, I opted to receive a giftcard to one of the participating retailers, and I got $25 for my $20.

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