5 Credit Card Tips I Wish I Learnt Sooner
As someone who has experienced ups and downs with credit cards over the years, I have recently started to reflect on some of the things I wish I had of known when I first started using them. If only someone had told me about these things, I think I would have avoided a mountain of debt and really maximised my savings.
As a consumer, I actually have a few issues with credit cards and banks in general. I find it extremely difficult to understand the terms and conditions and the hidden catches of each card when I am researching it. If any banks are reading, it would be really helpful if you could move away from legal speak and into consumer speak. Why not tell us all important details in one easy to read hit?
Hindsight is always a killer, but none the less – here are five things that I have learnt over the past years that would have been useful to know, I hope they may in some way benefit you.
Rewards points are not as good as you think
I opted for rewards points at a young age, believing it would somehow help me get something for free. Like the old saying goes, nothing ever comes for free – especially money borrowed from a bank.
This does not apply to all cards, but a general rule of thumb is that you are much better off having a low interest credit card than you are to have a rewards card that has a higher interest rate. It is just common sense, I would rather save a couple of hundred dollars a year in interest than have enough ‘points’ to get a new Sunbeam Kettle or similar.
Rewards cards can be good, but you need to pay them off in full each month and utilise the 55 days interest free to your advantage. If the debt is going to sit there for a while, forget the rewards cards.
Whatever credit limit the bank gives you, ring them up and halve it
Banks are notorious for giving you credit limits that are technically payable, but very much suss on the front of the ability to meet repayments should you use the full amount you have on offer.
If they give you a $4000 limit, ring them up and tell them you only want $2000. Trust me, it will save you a lot of pain and effort if you force yourself to never go that high.
Try not to jump around from card to card
When I had large credit card debts, I tended to jump around from card to card in the hope of saving money with balance transfer rates and little tricks here and there.
You would be surprised of the outcome if you called your bank and told them you were looking to change banks to take advantage of a balance transfer or no interest period. Most of them will be able to match the offer in the hope of keeping you as a customer. Give it a try, you will be pleasantly surprised!
Be wary of credit card promotions
Most banks offer numerous promotions to attract new customers. Ranging from interest free periods, extended low rates for transfers, wiping of annual fees for the first year – just remember, educate yourself about the product in more detail before taking this offer up.
Ensure you know what will happen after the promotion ends. Will your interest rate jump to an astonishingly high rate? Will your annual fee be twice that of a normal card? Will the low interest rate back charge on interest on expiry? Who knows! Ensure you understand that card before signing up.
Debit cards can be just as good as Credit Cards
Debit cards are no different to credit cards except that they only spend money you have readily available in your account. This means you won’t go into debt. For some people, the only reason they get a credit card in the first place is because they need it for online shopping or buying tickets, something a convential ATM card is unable to do.
If you are one of those people, why not convert to a debit card? Or better yet, hopefully you don’t have a credit card and can start on a debit card without the temptation to go into debt.
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7 Responses for 5 Credit Card Tips I Wish I Learnt Sooner
I would think the first thing to learn would be not to carry a balance on your credit card in the first place. And if you succeeded in that you could then actually use credit cards with point systems to earn while using them.
Personally, I never spend more then I will have in my bank account so I’m sure I can pay off my credit card at the end of the month.
Number 1 tip that seems to be missing is: pay off your balance, in full, every month. Never, ever, ever, carry a balance for longer than the interest free period.
Also, you mention switching to a debit card. Well, not all places (at least here in the UK) accept certain types of debit card, whilst credit cards are mostly universal. Again, if you pay off your balance each month, it’s not a problem.
I use credit cards mainly as a convenience, never as a way of spending money I don’t have. For me that seems to be the only acceptable way of using them, but evidently many people seem to disagree.
That is indeed a great tip, if it is possible; paying off your credit card each month in full is the number 1 option that will benefit you but not as easy for some.
This is a great post but the part about the debit cards needs to be fixed. Debit cards *are* different than credit cards. Aside from only using money that is in your account, many merchants will place a hold on your debit card until the transaction goes through. This can be anywhere from the price of the product to sometimes twice the price of the product or service.
I work at a hotel. When a debit card comes through, the system we use automatically calls the bank for an approval of the entire amount of the room and tax plus $50 per day of the guests stay for incidental charges. This protects the sale on our end and ensures that the money is secure.
However we only send out an approval for around $1 for credit cards — to ensure the account is valid.
The hold is cleared and we take only what the customer owes us at checkout, but banks sometimes won’t clear the hold for 24-72 hours.
It is a good idea to first find out if a company will place a hold on your account until the transaction goes through before you decide to use a debit card. It can be better to use a credit card and just pay it off afterward in those instances.
I am from the US, so that’s where my perspective is.
I pay my credit cards in full every month so number 1 is not true for me.
Number 2 is bad advice for the US at least because of the credit scoring system used by many banks. Even if you pay in full each month, if you allow a balance to show on your statement that is what your utilization is calculated from, and if your credit limits are lower, your score may be lower. If you are trying to maximize your score, you want to show less than 10% of your credit limit being utilized.
Number 3 is true if you don’t have the money to actually pay the balances, but it can be worthwhile if you are playing credit card arbitrage (though with today’s interest rates, that game is hurting unless you do the high rate gimmick checking game). Number 4 also relates to this same point.
Number 5 is not true the in the US. Debit cards are inferior to credit cards because credit cards provide more protection by law. Other advantages of credit cards include not risking your own money if fraud occurs and float time.
Actually, considering your credit score is based in part on your % of credit utilization, a wiser move would be to double your credit limit and curtail your spending as if you had cut in half.
Thanks for sharing such good post, according to me last tip of cc and debit card is the perfect one.
