Mr Credit Card from www.askmrcreditcard.com drops by today with a contribution. He is going to talk about credit card stuff that he sweats over. So I guess you should pay some attention if you use one or are about to get one. You might want to check out his best credit card deals page too.
When Daniel allowed me to write a guest post on this blog, I thought long and hard about a topic related to “Sweating the Big Stuff.” In my area of expertise, it is easy to get caught up in the details of credit cards rewards. And I probably look too much into any credit card details than most would care. Today, I’m going to share my thoughts about the main things to worry and be concerned about regarding your credit.
Credit Card Stuff To Sweat Over
Paying on Time – Paying on time for your credit card bills (or any bills for that matter) should always be a big concern of yours. A person who pays their bills on time shows responsibility. One way to stop worrying too much about this is to simply set up autopay for all of your bills. Money will be deducted from your bank account and the bills will always be paid on time. If you are not the type who wants to set up autopay, arrange to move your “due date” closer together so you will not have to keep writing checks the whole month.
Joint Accounts and Cosigning – If there is anything to worry about, it is having joint accounts and cosigning for someone else. If you co-sign a credit card for someone else, you’d better be on top of things cos a late payment or default hurts your credit score big time. It is always best to have individual accounts even if you have joint accounts. Be especially careful about joint accounts when you are going through divorces. There have been simply too many instances where an ex-spouse has abused a credit card that was under a joint account and ruining the other person’s credit.
What happens to your points when your card is canceled? – This is something to actually sweat about. Let’s use a regular rewards card as an example. Say you have racked up 100,000 points over the course of a couple of years. But you have not used them. Then for some strange reasons, your credit card issuer decides to close your credit card (believe me, it has happened to many folks who do not know what hit them). When that happens, you can lose all the reward points you have earned. Some may be lucky enough to do a last minute redemption, but many are not. It could also happen to credit cards that only pay your cash rewards (or credit them) at your anniversary date. Get your card canceled on the 11th month and you could lose a years of rewards.
This is actually something to sweat about (and think about seriously) if you are researching a rewards card to get. One of the surest ways to prevent this from happening to you is to get an affinity card like an airline miles credit card. For example, if you get a Delta credit card, your miles are transferred into your Delta Skymiles account after the end of the month. Delta could care less if your credit score takes a dip or if you missed a payment or if your card gets canceled. And if your card does get canceled, at most you lose just one month’s of miles earned.
For folks who are frequent flyers, this is something to really think about. If you carry a regular rewards cards whose program belongs to the credit card issuer, the best advice I can give is to use them as soon as you can redeem it for something you really want.
Mistakes in your credit report – This issue is worth sweating over. Any silly mistakes that appear in your credit reports and negatively impacts it is detrimental to your credit score. The solution is to keep on top of your credit score by getting your free credit report each year through www.annualcreditreport.com or by signing up for some of the best credit report tools. And going through it with a fine tooth comb.
Getting cash rebates or frequent flyer miles – Assuming you take the advice of never carrying a balance and paying your bills in full, then make sure that you get paid by your credit card. The best way is to actually get a simple credit card with cash back rewards. Getting 1% or 2% back on your purchases a year can save you quite a bit of money year. For me personally, I’ve been getting about $1000 back in rebates every year. It is worth sweating over this issue because in the long run, it can really save you a lot of money. However, I also sometimes fly international and there are occasions where a large deposit of frequent flyer miles would help me tremendously. This issue is something I sweat over now because though I have been earning great rebates the last few years, I am beginning to fly more often again. There is no one correct answer. But you have to work it out yourself to see which is better for you – cash rebates or frequent flyer miles.
Car rental insurance – Each time I got a new card, this is one of the features I scrutinize lot because I always rent a car during our vacations. Most credit card companies provide you with auto rental collision when you use the card to pay for your car rental. This actually saves you a lot of money because an auto collision from the rental company can come up to a couple of hundred bucks depending on how long you rent the car. This is one feature that is really worth having in a credit card and it is very important to look for one that has this feature.
Extended warranty – This is another feature to sweat about. Many credit cards offer this feature. But American Express probably has the best deal for this feature among all the cards out there. Essentially, if you use a credit card with this feature for a major purchase, you can get extended warranty for up to an additional year beyond the manufacturer’s warranty. This is important for big ticket items like plasma TVs, washing machine etc. Very often, when you buy stuff at these at major retailers like Best Buy, you will offer you additional warranties at additional costs. But these come free if your credit card has such features.
How to use your reward points – This is something worth sweating and thinking over. For frequent flyer miles accumulators, the best way to actually use your miles is for international flights (especially business class) and first class upgrades as they generally provide the most bang for the buck in terms of value you get per point. Using points for domestic flights is not always the best use of miles. For most folks, cash back is probably the best way to redeem points. Using reward points for merchandise is a waste of points most of the time.
Things Not Worth Sweating About
Every little discount that is offered – Go to any retail store, buy some stuff, and when you check out at the counter, you are likely to be asked to get “that stores credit card” because you can get 10% with your purchase (or something like that). Ignore these deals (they are not worth sweating over) because if you take everyone’s advice, you’ll simply be opening too many credit cards which you will hardly use. This makes keeping track of bills difficult.
Worry about squeezing the last cent from their credit card rewards – Some folks will combine perhaps combine lots of cards to earn the most cash rebates. They will get a few different cards and just each one when it is the right time to do so. While that is fine for some folks who are really into it like a coupon hound dog, for the rest of us, that is simply too much of a hassle. Just get a couple of cards that work for you and simply stick with them.
Whether to close a card or worried about how many cards you have – Many folks who very old cards that they do not use anymore. They want to close it but because length of credit history is an important component of one’s credit score. I say do not sweat over it. You can simply put the card in a drawer and not use it. Even if you close it, you might lose a some points, but life goes on and it is not going to be a disaster.
Ending Thoughts – My views above reflect my present situation. I pay in full for my credit card bills every month and have a mortgage. Hence, I’m not really too hung up over my credit score. For those looking for a mortgage in the near future, or carry a balance and wish to get a low rate card, there will be other more important things to sweat about that the points I’ve just mentioned. Please share with us what you look out for in your credit life.