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1. Before applying for a new credit card, determine what it will be used for.
Understanding your goals will not only help you find a credit card that’s right for you, it can also help you avoid wasting time and money on a card that’s not right for your needs.
“I encourage people to first determine their goals for getting a new credit card,” says Mermel. “If you love to travel and want to earn points for it, it would make sense to get a travel rewards card. Start by thinking about what you are looking for and you can find a card that is right for you. “
Keep in mind that travel credit cards come with high annual fees, complicated rewards programs, and generally require you to have a great credit score. So if you are more interested in the cash back aspect of rewards cards, there are simpler options.
If you don’t want to pay off your credit card, look for one with no annual fee, like the Citi® Double Cash Card or the Chase Freedom Unlimited® Card.
Even with no annual fee, you still get great benefits with both cards. With the Citi Double Cash card, you can earn 1% on all qualifying purchases and then an additional 1% when you pay your bill. Chase Freedom Unlimited card gives new cardholders 5% cash back on up to $ 12,000 in grocery store purchases in the first year, plus 5% cash back on travel , 3% cash back on meals, and 1.5% cash back on all other purchases.
We took a look at 44 popular cash back credit cards with no annual fee: here’s our pick for # 1
If you are just starting to build your credit, there are credit cards for you too. You may consider the Discover it® secure credit card or the Visa® Petal® 2 “Cash Back, No Fees” credit card. Both of these cards offer cash back and have no annual fee.
We analyzed 27 popular credit cards to build your credit history – here’s our pick for # 1
2. Get into the habit of paying off your balance in full.
If you don’t pay your bill in full each month, you may face high interest charges this can make it very difficult to get out of debt. Interest on your credit card is calculated based on your principal amount (i.e. your balance) plus any accrued interest you already owe. So you pretty much pay interest on top of the interest if you keep a balance from month to month and only make the minimum required payment.
Not paying your credit card bill on time and in full every month can turn a strategic credit card offer – like spending a certain amount to earn bonus reward points – into a costly mistake.
“Don’t put purchases on credit cards to get reward points if you don’t pay your entire bill monthly,” Harrison cautions. “The interest charges will easily wipe out any bonuses you’ve received.”
3. Avoid using your credit card as emergency funds
Of course, emergencies do arise from time to time. But try not to pick up your credit card when they do.
When you use a credit card to cover emergency expenses, you earn interest on the balance if you can’t pay it off in full. The interest charges will make the emergency even more expensive. Plus, sometimes being stuck making payments for a long time can make you feel like you’re never going to get away with it.
“When you use your credit card as an emergency fund and you can’t pay it off in full, it creates what’s called a debt brake because it makes people uncomfortable having these balances, ”explains Mermel.
Instead of relying on your credit card to cover unforeseen expenses, save an emergency fund in a high yield savings account. Experts generally recommend saving three to six months of spending on the account to use in an emergency.
Marcus High Yield Online Savings Account and Ally Bank Online Savings Account both offer higher than average APYs, so your money can earn interest and you can set up an emergency account entirely. funded a bit faster.
4. Use a credit card instead of a debit card whenever possible.
Both experts agree that consumers should generally try to use a credit card for purchases instead of a debit card, as credit cards offer more protections that can really come in handy.
For example, if someone steals your credit card information and uses it to make a large purchase (or even a bunch of small purchases), you can usually call your card issuer to report the fraudulent activity and have the charges removed from your account. declaration. Your card provider will usually deactivate the old credit card and send you a new one.
With a debit card, however, things get a bit tricky. If someone makes unauthorized transactions with your debit card number (without actually having the card), you will not be responsible for any charges if you report them within 60 days of your next statement.
But if your debit card is lost or stolen, you need to act quickly before someone uses it. According to the Federal Trade Commission (FTC), if you report your stolen or lost debit card before a fraudster can use it, you won’t be charged anything. If the loss is reported within two business days, you may be liable for up to $ 50 in fraudulent charges. But if it’s been more than two business days but less than 60, you can be held liable for up to $ 500 for unauthorized transactions. And if it has been more than 60 business days when you report the loss, you could be responsible for all charges.
“Credit cards provide additional protection, give you a grace period to pay for the purchase and allow you to earn reward points,” Harrison said.
However, Harrison also cautions that while credit cards can be a useful tool, people who usually buy more than they can actually afford should use cash or a debit card instead. Otherwise, they will be hit with high interest charges which could lead to a longer debt repayment time compared to someone spending only what they can afford to pay in cash each month.
5. Carry two credit cards – one primary and one for backup
Once you feel comfortable managing a credit card and using it responsibly, it may be a good idea to consider adding a second to your wallet.
“I generally recommend having two credit cards: a primary card and a backup card,” says Harrison. “I have encountered situations where a card has not worked and you don’t want to be stuck without another payment option.”
Additionally, adding another line of credit can actually help improve your credit score, as it can increase your total amount of available credit and lower your credit utilization rate if you typically keep spending less. to a single credit card. But again, only consider opening an additional credit card if you already have a good grasp of managing the ones you own and making full, on-time payments every month.
At the end of the line
Credit cards can be a great opportunity to improve your finances, especially if you use one with attractive perks like cash back and travel rewards. However, in order to get the most out of your credit card, you need to make sure you manage it responsibly.
Knowing your goals for the new credit card can help make sure you don’t get carried away by the promise of luxury perks you won’t really use.
Another big part of managing smart cards is knowing how much you can comfortably afford to pay each month and making sure you don’t spend more than that. By following these simple tips, you can get the most out of your card.
Petal 2 Visa credit card issued by WebBank, FDIC member.
For pricing and fees for the Discover it® Secure Credit Card, click here
Editorial note: Any opinions, analysis, criticism or recommendations expressed in this article are the sole responsibility of the editorial staff of Select and have not been reviewed, endorsed or otherwise approved by any third party.