Choosing your next credit card

When you are first rebuilding your credit, it can be tempting to jump at any card that will have you. But, after you’ve developed some positive credit history, you can afford to be choosier when it comes to credit card offers. Before you apply for that new piece of plastic, give some thought to all of the following regarding Choosing a new credit card.

1. The APR

The annual percentage rate is how much it will cost you in interest to carry a balance on the card. In many cases, it is a certain set percentage plus prime, which is variable. Try to get the lowest APR you can qualify for, even if you don’t plan to carry a balance on the account. If you are not approved for a low rate at first, you can also call back periodically and ask for a lower rate.

2. The credit limit

With a card that only has a limit of a thousand or so dollars, it’s easy to hit a high utilization rate quickly. This can drag down your credit score. Be careful about limits and try to keep your balance under 30% of what is available. If you feel you can safely manage more credit, ask your credit card company for a higher limit. They’ll have to run your credit again, but, they may extend a higher rate if you have a good history of payment.

3. Annual fees

This is where many cards, especially reward cards, get you. Some cards have fees as high as $100 per year. When possible, look for cards that carry no annual fees. If you are looking at a rewards card that has a sizable fee, do the math to figure out whether the incentives are enough to balance the annual cost. You should also know what fees are charged if you forget to make a payment or if you go over your limit.

4. Rewards and incentives

It’s fun to get paid to spend your own money. Look for cards that offer cash back or bonuses. Ideally, these cards should offer bonuses in categories that you use often and come with no fees. If your card is one that offers different cash back bonuses at different times of year, time your spending to make the most out of your new card. When looking at incentives, you should also assess the requirements. To get some bonuses, you have to put a certain amount of charges on the card within a set period of time.

5. Your spending habits

Look at past credit card bills and your monthly bank records to honestly assess how you spend money. Do you tend to overspend when you have access to new credit? And, do you have a good reason for applying for a new card? If you do not have a lot of financial discipline, it may be best to think twice about getting a new card if there’s not much benefit.

Credit can be a temptation, but, it can also be a handy tool. Access to credit cards can mean more control over when you and how you spend and can give you bonuses like cash back and airline miles. Need some help learning to manage credit wisely? Get in touch with us. At Key Credit Repair, we offer counseling and advice to help you make the most of your financial life.

Credit Card Rewards – Key Credit Repair

Early in 2013, deal site guru Brad Wilson made headlines by racking up 4 million frequent flyer miles without spending a dime. What he did was genius: he used his rewards credit card to buy dollar coins. The US Mint ran a promotion where they sold coins to purchasers with free shipping to encourage people to adopt the one dollar coin. So, Brad would purchase the coins, deposit them in his bank account, then pay off his credit card with the cash. Over an eight month period, he made several purchases of thousands in coins, which totaled $3 million. Each dollar equaled a point on the card; he then used those to purchase frequent flyer miles at a ratio of 1 and a quarter per point.

While Brad’s holds the black belt in credit reward maximization, there are many other great ways to get the most bang for your plastic buck:
Keep a List of What to Buy with Which Card

The Amazon Chase card gives you three points for everything you buy on Amazon. Discover has rotating rewards with a different category highlighted each quarter. Other cards offer big bucks back in categories like restaurant meals, groceries or office supplies. Carry a range of cards so that you can always get the best return.

Put Everything Through Your Cards

The most skillful reward card ninjas move every purchase possible through their credit cards. They pay their rent or mortgage with the card and pay in full during the grace period. They pull out the card for groceries. They even set up accounts on services like Amazon Payments to pay people like the babysitter and fund the accounts with the rewards card. Think about how much you earn and spend each month; the rewards could be substantial over time.
A Miniature Version of the US Mint Scheme

While the US Mint has discontinued their program, it’s still possible to pull off the same results on a smaller scale. Find a card that has great rewards at drug stores; then, use your credit card to buy gift cards at the shop. If you buy American Express or Visa gift cards, these can be used wherever you’d usually use plastic but get a smaller reward. Just make sure that the fees for the cards don’t exceed the benefit you’d get from the points.

Double and Triple Rewards

Reward cards can be used to buy discounted gift cards at sites like CardPool or Plastic Jungle. Discover is offering their 5% bounty on online purchases this quarter, so, this is a great time to stock up. You will earn the higher cash back rate and also get a discount on the cards. Some CardPool cards are offered at discounts of up to 25%. If those cards are on an item you need, you score. Then, move your purchase through another rewards gateway like eBates or SwagBucks. You’ll get paid again to make your purchase at your final destination.

As always, read carefully when using rewards cards to make sure you get credit. And, don’t spend more than you’d otherwise spend. But, if you are careful, rewards cards can put a little perk back in your pocket.

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