Tag Archives: credit cards

 

Jul16

The Pros and Cons of Rewards Credit Cards

Posted: July 16, 2018 by Ashley Dull

If you’ve done even a little research into credit cards, then you’ve likely run across a number of blogs and forums with stories about people using credit card rewards to earn big bucks and fund lavish vacations.

 

But what’s the real story? Are credit card rewards really all they’re cracked up to be? The answer is: maybe. As with most things in life, rewards cards have both pros and cons, all of which should be considered before you decide to fill out an application.

 

Pro: You Can Save on Nearly Every Purchase

 

For the rewards card novice, cash back credit cards are the most straightforward and user-friendly place to start. And the most obvious pro to cash back rewards is the ability to save on just about everything.

 

With most cash back cards, you’ll earn cash back with each purchase that can later be redeemed for a statement credit. Cash back rewards are like a rebate good for any credit card purchase.

 

The amount you can earn will vary based on the card you choose and how you spend, with some cards offering big bonus rewards for purchases in popular categories like gas and groceries. And some issuers even have options for credit-builders to earn cash back rewards, so a bad credit score doesn’t have to get in the way of saving on every purchase.

 

Con: Some Cards Have Annual Fees

 

The first major con you’ll encounter with some rewards credit cards is the annual fee. The more rewards, perks, and benefits a card offers, the higher its annual fee is likely to be — but that’s not necessarily a bad thing. In fact, depending on the card, you can often come out ahead of even the highest annual fees.

 

For example, a credit card with a $100 annual fee might seem steep, but if that card offers a high rewards rate in a category you use frequently — say dining or groceries — then you could easily earn more rewards in one year than you spend on the annual fee.

 

Of course, if you won’t get more out of the card than the annual fee is worth, it’s easy enough to avoid; just select a card without an annual fee. Dozens of great rewards cards are available sans annual fee, so you don’t need to pay to earn rewards.

 

Pro: You Can Fly or Stay for Free

 

Another prominent pro of rewards credit cards is the same one you often read about: free travel. If you’ve mastered cash back rewards and want to up your rewards game (and you like to travel) then a points or miles rewards credit card can provide significant value.

 

That’s because points and miles often have variable value based on how you redeem them, with travel redemptions almost always providing the best rate. In most cases, the very best redemption value will come from transferring your credit card points to an airline or hotel loyalty program, which allows you to redeem for free flights and hotel stays with your favorite brands.

 

Most points and miles credit cards offer the ability to maximize your earnings with the right combination of bonus categories, allowing you to rack up rewards at a remarkable rate all year long for your big summer vacation. Plus, the majority of travel rewards credit cards come with large signup bonuses, many of which are valuable enough for free travel right off the bat.

 

Con: Carried Balances Accrue Interest Fees

 

Another caution of rewards credit cards is also true of any credit card: the interest fees. When you use a credit card, you are essentially borrowing money from the card issuer to make a purchase. Interest fees are the cost of borrowing that money. Since credit card interest rates can be high, especially if you have a low credit score, carrying a balance on your credit card can get expensive quickly.

 

However, you can easily avoid being charged interest simply by ensuring you never charge more than you can repay in a single billing cycle. The majority of credit cards operate with an interest fee grace period on new purchases. This means you won’t be charged interest on your balance so long as you pay it in full before your due date.

 

Pro: You Can Get Extra Perks & Benefits

 

As if savings and free travel weren’t enough, rewards credit cards have another big pro: extra perks and benefits. To start, all the major networks — Amex, Discover, Mastercard, and Visa — offer cardholder benefits for most of their rewards credit cards that can include perks like primary or secondary rental car insurance and concierge services.

 

Additionally, rewards credit card issuers also provide many money-saving cardholder benefits and useful perks, including things like cellphone protection and exclusive discounts. Travel rewards credit cards, in particular, are much-lauded for their extensive cardholder benefits that can include elite hotel or airline status, annual statement credits, and airport lounge access.

 

 

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Jun15

Ways to Minimize Summer Vacation Debt

Posted: June 15, 2018 by Rachel Shepard

For most families, summer is the ideal time for a vacation; schools are out, the weather is warm, and most venues are open for business. But when we spend the whole year eagerly waiting for summer vacation to come ‘round, it can be all too easy to get swept up in making the most of it — leaving our budgets behind.

 

But you don’t have to break the bank to have an awesome summer vacation, and there are a number of simple ways to minimize (or even eliminate) summer vacation debt.

 

Save Money — & Credit Card Rewards — All Year Long

 

The easiest way to ensure you aren’t dealing with summer vacation debt long after your suntan has faded is to start saving for your trip as early as possible. After all, if you have the money to pay for your trip outright, you won’t need to take on any debt to do so.

 

For some people, this may mean making a little room in the budget for monthly contributions to a separate vacation fund. You can also set aside extra money, such as bonuses and tax refunds, to go toward your vacation instead of making splurge purchases like upgrading your entertainment system.

 

Another simple way to save for summer throughout the rest of the year is to use a rewards credit card. For example, there are a ton of options for travel rewards credit cards that earn points or miles on everyday purchases, with many offering bonus rewards for purchases in popular categories like fuel and dining.

 

By the time summer rolls around, you could have enough rewards saved up from your everyday purchases to pay for flights, hotels, and a whole host of other vacation-related travel expenses. And save up your cash back rewards year-round to build a stockpile of statement credit that can cover everything else, from meals to souvenirs.

 

Be Flexible About the When & Where

 

One method for keeping your summer vacation costs at an affordable level is to be flexible about your travel plans, including both where and when you’re willing to travel. Taking a summer vacation to a destination that’s more sought-after during the winter, for instance, can score you fantastic off-peak deals and ensure you’re not fighting crowds your whole trip.

 

You may even want to consider some off-the-beaten-path destinations instead of planning a trip to one of the more popular tourist hotspots. For example, there are plenty of smaller beachside towns that offer the same white sand and blue water as their big-time competition, but they often do it at a fraction of the cost.

 

And you’ll also want to avoid planning a trip during the more popular travel times, such as Memorial Day weekend or the week around the Fourth of July. Airlines and hotels know they’ll have few vacancies during these peak travel times and tend to price their products accordingly.

 

Book Your Flights Early — Or Really Late

 

If you don’t have a lot of flexibility in your travel timetable, often your best bet for finding savings on your flights and hotels is to book early. Many hotels, for instance, will offer early-bird booking specials that can potentially save you hundreds over the course of a multi-day stay.

 

Don’t forget to keep an eye on your itineraries, however, as prices can fluctuate on a weekly basis, potentially offering the opportunity to snag an even lower rate down the line. Most airlines and hotels will allow you to make changes to your reservation up to seven days before your trip, but make sure you’re aware of any fees for changing your reservations.

 

At the other end of the spectrum, you can also typically score a deal if you have the flexibility — and constitution — to wait until the (nearly) last minute to book your travel. Airlines and hotels hate having empty seats and rooms, so they will frequently drop their prices on last-minute vacancies to ensure a full booking.

 

Obviously, this method is hardly without risk, as there’s certainly no guarantee you’ll find cheaper rates at the last minute — or any availabilities at all. If you’re going to try this method, you may want to have a backup vacation plan… just in case.

 

Skip the Travel for a Staycation

 

While traveling is all well and good, there’s no actual rule that says you must go somewhere to have an awesome summer vacation. Instead, you can enjoy the warm summer weather and time as a family at home having a fun, affordable staycation.

 

Of course, that doesn’t have to mean you’re stuck in the house all summer long. Most cities and towns offer a variety of free or inexpensive activities and events, particularly in the sociable summer months, giving an adventurous family plenty to keep them busy from May well into September.

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Mar19

When it’s Time to Cancel a Credit Card

Posted: March 19, 2018 by Ashley Dull

From the time we start building credit in our late teens or early 20s, many of us start collecting credit cards. Those credit cards inevitably begin to pile up, quickly overtaking even the most robust wallet.

 

By the time you can hardly sit for the bulk of your billfold, the idea of canceling a card or two starts to look pretty good. Even if your card collection has maintained a manageable size, you may need to consider whether it’s time for an upgrade; as your credit grows and financial needs change over time, your old cards may not be the best fit anymore.

 

For the most part, an unused credit card does little more harm than take up a slot in your wallet, and it may actually be helping your credit. That being said, there are two important reasons you may want to consider canceling a credit card: high fees or high interest rates.

 

To Stop Paying Unnecessary Annual Fees

 

The most pressing reason to close a credit card that isn’t pulling its weight is if it charges an annual fee. For example, while instant-approval credit cards can help build credit, they aren’t cards you want to hold on to forever due to the high annual and monthly fees they typically charge. If you’ve used the card responsibly, your credit score should increase enough to qualify for a better, fee-free card so you can leave the costly credit-builder behind.

 

At the other end of the spectrum, many elite rewards credit cards will charge high annual fees, with $400 to $500 fees not uncommon. While these cards often come with rewards and benefits that can make them worth the annual fee to some users, those who fail to make the most of the extra benefits may not be getting their money’s worth out of the annual fee. If you can’t justify the fee, cancel the card before your next fee is charged and look for a better fit.

 

To Avoid Paying High Interest Fees

 

The other main reason you may consider closing a credit card is if it charges a high interest rate. Although a card’s interest rate won’t typically matter if you never carry a balance, the temptation to use a credit card is always there so long as you have the card. If you have credit cards with interest rates above 20%, you may want to consider canceling the card and replacing it with one that offers a lower ongoing APR.

 

Credit Impacts to Consider Before You Cancel

 

While there are several good reasons to cancel an unused credit card, there is one solid reason to consider leaving it open: your credit score. Yes, closing a credit card account can potentially lower your credit score.

 

The impact of closing a credit card may be seen in several facets of your credit score, with the primary impact being to your utilization rate. FICO considers both your individual utilization rates as well as your overall utilization rate when calculating your score. Reducing your total available credit by canceling a credit card can increase your utilization rate if you currently have other credit card debt.

 

Other important FICO score factors can also be impacted by canceling a credit card, albeit to lesser degrees. Your average account age and overall credit history length (jointly worth 15% of your FICO score) can be reduced by canceling a card, particularly one that you’ve had for many years. While positive credit accounts will remain on your credit report for up to 10 years after they’re closed, closing very old accounts can have negative score impacts.

 

Lastly, creditors like to see a mix of several credit accounts and different types of accounts, as it shows you can handle a variety of credit products. As such, your overall credit mix, worth 10% of your credit score, can also be hurt by canceling a credit card, especially if you do not have very many other credit accounts.

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Oct22

Some Credit Cards Don’t Fall Under the CARD Act of 2009Not Every Card Is Covered by Landmark Federal Law

Some Credit Cards Don’t Fall Under the CARD Act of 2009

Posted: October 22, 2013 by Rachel Shepard

In 2009, Congress passed the CARD Act (officially known as the Credit Card Accountability Responsibility and Disclosure Act of 2009) to protect consumers against excessive interest rates, fees and miscellaneous charges. The act prohibits credit card issuers from initiating fee traps, excessive interest rate hikes on existing balances that create consumer default or retroactive late fees. It also mandates that issuers provides a written account of all rates, fees and charges in plain, simple language that is visible to consumers, as well as guards against excessive marketing of credit cards to young people and students.

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Sep06

Credit Card Scams and Gimmicks to AvoidBeware of Too-Good-to-Be-True Offers

Credit Card Scams and Gimmicks to Avoid

Posted: September 6, 2013 by Rachel Shepard

With credit card issuers loosening their requirements for cardholders once again, consumers now have a number of choices available to them. At the same time, these issuers are offering a variety of gimmicky cards to attract people to their products. The problem is that many of these offers end up being scams, since with them you end up paying much more than you had envisioned. Before signing up for one of these special offers, make sure that you are aware of what it will cost you.

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