credit card tips

How to Protect Yourself From Credit Card Theft

Emily Guy Birken — Sat, 07 Nov 2020 22:45:33 +0000

Last fall, I received an email that appeared to be from my web host. The email claimed that there was a problem with my payment information and asked me to update it. I clicked on the link in the email and entered my credit card number, thinking that a recent change I'd made to my site must have caused a problem.

The next morning, I logged onto my credit card account to find two large unauthorized purchases. A scammer had successfully phished my payment information from me.

This failure of security is pretty embarrassing for a personal finance writer. I know better than to click through an email link claiming to be from my bank, credit card lender, or other financial institution. But because the email came from a source that wasn't specifically financial (and because I was thinking about the changes I had made to my website just the day before), I let myself get played.

Thankfully, because I check my credit card balance daily, the scammers didn't get away with it. However, it's better to be proactive about avoiding credit card theft so you're not stuck with the cleanup, which took me several months to complete.

Here's how you can protect yourself from credit card theft.

Protecting your physical credit card

Stealing your physical credit or debit card is in some respects the easiest way for a scammer to get their hands on your sweet, sweet money. With the actual card in hand, a scammer has all the information they need to make fraudulent purchases: the credit card number, expiration date, and the security code on the back.

That means keeping your physical cards safe is one of the best ways to protect yourself from credit card theft. Don't carry more cards than you intend to use. Having every card you own in a bulging wallet makes it more likely someone could steal one when you're not paying attention and you may not realize it's gone if you have multiple cards.

Another common place where you might be separated from your card is at a restaurant. After you've paid your bill, it can be easy to forget if you've put away your card (especially if you've been enjoying adult beverages). So make it a habit to confirm that you have your card before you leave a restaurant.

If you do find yourself missing a credit or debit card, make sure you call your bank immediately to report it lost or stolen. The faster you move to lock down the card, the less likely the scammers will be able to make fraudulent charges. Make sure you have your bank's phone number written down somewhere so you're able to contact them quickly if your card is stolen or lost. (See also: Don't Panic: Do This If Your Identity Gets Stolen)

Recognizing card skimmers

Credit card thieves also go high-tech to get your information. Credit card skimmers are small devices placed on a legitimate spot for a card scanner, such as on a gas pump or ATM.

When you scan your card to pay, the skimmer device captures all the information stored in your card's magnetic stripe. In some cases, when there's a skimmer placed on an ATM, there's also a tiny camera set up to record you entering your PIN so the fraudster has all the info they need to access your account.

The good news is that it's possible to detect a card skimmer in the wild. Gas stations and ATMs are the most common places where you'll see skimmer devices. Generally, these devices will often stick out past the panel rather than sit flush with it, as the legitimate credit card scanner is supposed to. Other red flags to look for are scanners that seem to jiggle or move slightly instead of being firmly affixed, or a pin pad that appears thicker than normal. All of these can potentially indicate a skimmer is in place.

If you find something that looks hinky, go to a different gas station or ATM. Better safe than sorry. (See also: 18 Surprising Ways Your Identity Can Be Stolen)

Protecting your credit card numbers at home

Your home is another place thieves will go searching for your sensitive information. To start, you likely receive credit card offers, the cards themselves, and your statements in the mail. While mail theft is relatively rare (it's a federal crime, after all), it's still a good idea to make sure you collect your mail daily and put a hold on it when you go out of town.

Once you get your card-related paperwork in the house, however, you still may be vulnerable. Because credit card scammers are not above a little dumpster diving to get their hands on your credit card number. This is why it's a good idea to shred any paperwork with your credit card number and other identifying information on it before you throw it away.

Finally, protecting your credit cards at home also means being wary about whom you share information with over the phone. Unless you've initiated a phone call of your own volition — not because you're calling someone who left a voicemail — you should never share your credit card numbers over the phone. Scammers will pose as customer service agents from your financial institution or a merchant you frequent to get your payment information. To be sure, you can hang up and call the institution yourself using the main phone number.

Keeping your cards safe online

You should never provide your credit card information via a link in an email purporting to be from your financial institution or a merchant. Scammers are able to make their fake emails and websites look legitimate, which was exactly the reason I fell victim to this fraud.

But even with my momentary lapse in judgment about being asked for my payment information from my "web host," there were other warning signs that I could've heeded if I had been paying attention.

The first is the actual email address. These fake emails will often have a legitimate looking display name, which is the only thing you might see in your email. However, if you hover over or click on the display name, you can see the actual email address that sent you the message. Illegitimate addresses do not follow the same email address format you'll see from the legitimate company.

In addition to that, looking at the URL that showed up when I clicked the link could've told me something weird was going on. Any legitimate site that needs your financial information will have a secure URL to accept your payment. Secure URLs start with https:// (rather than http://) and feature a lock icon in the browser bar. If these elements are missing, then you should not enter your credit card information. (See also: 3 Ways Millennials Can Avoid Financial Fraud)

Daily practices that keep you safe

In addition to these precautions, you can also protect your credit cards with the everyday choices you make. For instance, using strong, unique passwords for all of your online financial services, from shopping to banking, can help you prevent theft. Keeping those strong passwords safe — that is, not written down on a post-it note on your laptop — will also help protect your financial information.

Regularly going over your credit card and banking statements can also help ensure that you're the only one making purchases with your credit cards. It was this daily habit of mine that made sure my scammers didn't actually receive the computer they tried to purchase with my credit card. The fact that I check my balance daily meant I was able to shut down the fraudulent sale before they received the goods, even though I fell down on the job of protecting my credit card information.

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This article is from Emily Guy Birken of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

How to Get Ahead With a 0% APR Credit Card

Holly Johnson — Wed, 19 Feb 2020 09:00:13 +0000

Credit cards have made it extremely convenient to get what we need — from online shopping to everyday purchases, not having to hit the ATM and use cash saves time, space, and energy. But having easy access to credit also means it’s easy to overspend — something you just couldn’t do when paying with cash. You can end up with a mountain of debt that can take years or even decades to pay off.

One kind of credit card may be more likely to set you up for success, and this type of card can even help you save money on interest if you're struggling with debt already. Balance transfer credit cards, which can also be called 0% APR credit cards, actually let you avoid paying interest altogether for a limited time.

Two main strategies can help you get ahead with this type of credit card, but only if you use plastic with a plan and stay disciplined in your approach.

Earn rewards on a big purchase

If you want to make a big purchase and pay it off slowly without having to pay interest, you should check out 0% APR credit cards that let you skip interest payments and earn rewards for each dollar you spend. This type of card typically works well if you need to pay for new appliances for your kitchen, a major home upgrade or repair, or even a semester of college. By charging the large purchase to your 0% APR credit card, you may be able to earn an initial sign-up or welcome bonus as well as rewards as a percentage of your spending.

Of course, there are plenty of rewards credit cards that also dole out big initial bonuses and ongoing rewards while letting you avoid paying interest for up to 21 months. Make sure to compare rewards and cash back credit cards to see which ones might work best for whatever it is you need to buy and pay down slowly over time.

Consolidate high-interest debt

If you have a lot of debt at high interest rates, you can also get ahead with a 0% APR credit card — provided you stop spending and start focusing on debt repayment instead. Balance transfer credit cards often let you secure 0% APR on balance transfers for up to 21 months, although some do charge a 3% or 5% balance transfer fee for the privilege. Even if you do pay a balance transfer fee, however, the interest savings can far outweigh the fee.

If you're against paying a fee to transfer high interest balances over, you can look for cards that waive this fee for a limited time.

How to choose a 0% APR credit card

Whether you want to pay down a large purchase without interest or save money by consolidating high interest debt at 0% APR, it's crucial to make sure you wind up with a new credit card that offers the perks you want. Here's everything you need to look for as you decide.

0% APR offers that give you the time you need

If you want to pay off a large purchase over time or consolidate debt at 0% APR, you'll need to make sure you have enough time to pay off your debt entirely. Definitely compare 0% APR offers to see which ones give you plenty of time to accomplish your goal. If you don't, you'll wind up paying off debt at the standard variable APR, which will likely be very high.

Don't pick a card that might entice you to overspend

If you're really trying to pay off debt, stay away from cards that offer big sign-up bonuses within the first few months. You should use your balance transfer credit card to save money on interest, but don't use it for everyday spending.

Make sure to take fees into account

Most 0% APR credit cards don't charge an annual fee, but you should still compare balance transfer fees and other potential fees you may be charged such as late fees and over-limit fees.

Compare rewards programs

Finally, make sure you check out rewards programs if you want to rack up points on a large purchase. Some cards only let you redeem rewards for gift cards or cash back, whereas others let you cash in points for travel or transfers to airline and hotel partners. Compare rewards programs ahead of time so you earn the type of rewards you want the most.

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This article is from Holly Johnson of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

5 Smart Strategies to Rack Up More Credit Card Rewards

Holly Johnson — Thu, 30 Jan 2020 17:19:14 +0000

Where it can take months, or even years, to earn significant sums of rewards through regular credit card spending, credit card sign-up bonuses make it easy to earn $300 or more in cash back, or enough miles for a round-trip flight within a matter of months. All that's required to qualify is signing up for a rewards credit card and getting approved, then meeting a minimum spending requirement (usually in the $1,000 to $4,000 range) within a specific length of time (usually three months).

However, there are plenty of scenarios where earning a new credit card sign-up bonus just isn't in the cards. Maybe you're planning on buying a home in the near future and want to keep new hard inquiries off your credit report, or perhaps your credit score recently took a dip and you can't get approved for the top rewards credit cards.

Whatever the reason you can't earn a sign-up bonus right now, there are plenty of ways to rack up rewards using the cards you already have, as well as other methods.

1. Use the right card for different types of purchases

If you have a handful of rewards credit cards with different earning structures, it's crucial to make sure you're using the optimal card for each purchase you make.

Different cards might offer bonus points for certain types of purchases. One card might offer extra points on dining, while another offers bonus points for groceries. The key to maximizing rewards is ensuring you're using the card that offers the most points on everything you buy. (See also: 3 Ways Your Credit Card Rewards Can Make You Rich)

2. Find more expenses you can cover with a credit card

Make sure to go over your monthly spending and bills to ensure every purchase you can make with plastic is being paid with a credit card.

While it's easy to use credit for groceries, gas, and miscellaneous purchases you make, take a few minutes to think outside the box on the biggest expenses you have each month. Could you pay for daycare with a credit card? How about quarterly tax payments? Health insurance premiums? Your monthly utility bills?

The more expenses you can cover with a credit card each month, the more rewards you'll rack up over time. Just make sure you're not paying a fee to pay bills with a credit card. Otherwise, the rewards you earn may not be worth it.

3. Take advantage of shopping portals and dining programs

Airline shopping portals through programs like American AAdvantage, Delta SkyMiles, and Southwest Rapid Rewards let you earn additional airline miles for each dollar you spend, and all you have to do is "click through" your favorite portal before you shop. You'll usually earn an extra 1-3 miles for each dollar you spend at participating stores in these portals, but it is possible to earn an additional 10 miles or more per $1 spent in obscure specialty stores, or when stores are having bonus promotions.

Many airline loyalty programs also offer dining programs that let you earn additional rewards when you dine at participating restaurants in your area. Some even offer initial sign-up bonuses when you dine out at least three times within 30 days.

4. Use Amex Offers or Chase Offers

Both American Express and Chase have their own "offers" that let you earn additional rewards or cash back when you make a specific purchase within a predetermined length of time. You do need to log into your account and add these offers to your card before you make a purchase to qualify, and you'll have to meet all terms and conditions they stipulate as well.

Note that not all Amex Offers and Chase Offers reward you for shopping, per se. Some give you cash back when you spend a certain amount of money with a hotel chain, or when you spend a specific amount of cash on airfare with a certain airline. You might also earn rewards for buying a new mattress, hiring a dog sitter, or signing up for identity theft protection.

Also, remember that both Chase Offers and Amex Offers feature a benefit on top of the rewards you receive. You can score a discount with an offer, but you'll also earn applicable rewards for each dollar you spend with your credit card.

5. Sign up for free loyalty programs

Finally, don't forget that most loyalty programs let you join for free, and that there are plenty of ways to rack up certain types of rewards without a credit card. For example, you can join airline loyalty programs and earn airline miles each time you fly, regardless of how you pay for your airfare. The same is true with hotel programs like Marriott Bonvoy and Hilton Honors, since you earn hotel points for each dollar you spend with these brands.

If you don't travel a lot, also keep in mind that some cash back programs are available for regular purchases you buy. The Rakuten portal, for example, lets you earn up to 40% off purchases made at participating stores like Amazon, Macy's.com, and Walmart.com.

Like other shopping portals, cash back portals also set you up to double up on rewards. You can get cash back through a portal like Rakuten or Dosh for purchases you make, but you'll also earn rewards if you use a point-earning credit card to pay.

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This article is from Holly Johnson of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

The 7 Best Ways to Earn Travel Points and Miles Without a Credit Card

Holly Johnson — Wed, 19 Jun 2019 08:00:09 +0000

Points and miles make it possible to see the world at a much lower cost, but that doesn't mean everyone is in the best position to earn them. For starters, travel rewards credit cards offer the easiest way to earn rewards on your regular spending, but some of us don't have the 740+ credit scores required to get approved for them. Not only that, but consumers struggling with credit card debt may not want to run out and pick up a rewards credit card — especially since travel credit cards tend to charge high interest rates.

Now, here's the good news: You can earn travel rewards without a credit card, and some strategies are a lot easier than you think. If you want to earn rewards for travel but can't use credit right now, here are the best options to consider.

1. Join airline dining clubs

If you dine out often and want to earn airline miles, you should check out airline dining programs from Delta SkyMiles, Southwest Rapid Rewards, American AAdvantage, and more. These dining clubs will award you airline miles simply for signing up and eating at participating restaurants. You can even earn sign-up bonuses of up to 3,000 miles for dining out at least a handful of times within the first 30 days.

Keep in mind that dining clubs are free to use, and if you're going to dine out anyway, you might as well take advantage. At the very least, check out each of the dining clubs for airlines you fly with to see if you like any of the participating restaurants in your area. (See also: Everything You Need to Know About Airline Dining Rewards Programs)

2. Shop through airline shopping portals

If you shop online frequently, like most people do, make sure you're clicking through a portal each time you make a purchase. Airlines like United, Alaska, American, and Southwest have their own shopping portals that give you bonus miles for each dollar you spend.

All you're required to do is log onto your account and "click through" to each store's website before you shop for your purchase to qualify. And you don't have to use a credit card to pay for your purchases, either. Instead, you can use other forms of payment like PayPal or debit. (See also: How to Use Airline Shopping Portals to Cash In On Rewards)

3. Join airline and hotel loyalty programs for free

Make sure you're joining airline and hotel loyalty programs for brands you frequently use. This is especially important if you're booking paid travel. By including your loyalty number on your hotel or airline reservation, you'll earn points or miles for any travel you complete.

How much can you earn with paid travel? That totally depends on the airline or hotel and their basic earning structure. As an example, Southwest Rapid Rewards currently gives you six points per $1 spent on their basic Wanna Get Away fares, but you can earn 12 miles per $1 spent on their Business Select fares. Delta SkyMiles, on the other hand, currently awards five miles per $1 spent to basic members who book Delta-marketed flights.

4. Book all your hotel stays and rental cars through a portal

Whenever you book travel, take a moment to think of the ways you could earn additional travel rewards for each dollar you spend. For example, most airlines work with hotel and rental car partners, and they will award you miles in their programs if you book your travel through their website instead of somewhere else.

Many airline loyalty programs even offer bonus rewards when you book vacation packages and cruises, so make sure to scan your options before you book any type of travel online. With American AAdvantage Cruises, for example, you can earn up to 10,000 bonus miles per cruise booking. This is a nice perk if you were going to book a cruise anyway.

5. Check out PointsHound.com and RocketMiles.com

Check out PointsHound and RocketMiles, since both will award you airline miles in specific airline loyalty programs for each qualifying hotel booking you make.

PointsHound, for example, promises up to 10,000 miles for some hotel stays and you can choose from over 300,000 hotels and resorts worldwide. You also get the option to choose from popular airlines like Virgin Atlantic, United Airlines, American Airlines, Frontier Airlines, and more.

6. Take online surveys

Several airlines give their loyal customers the opportunity to earn miles for answering survey questions online. You won't earn a lot of miles with this strategy, but it's still better than nothing. And if you have some time to kill, spending a few hours answering easy survey questions can help you score a few hundred airline miles you can use later.

Here are a few of the top airline survey portals you should check out.

7. Watch for special promotions

Keep an eye out for special promotions from your favorite airline and hotel loyalty programs. From time to time, you can earn bonus points or miles for sharing a post or hashtag on social media or making a specific purchase.

The best way to find out about special promotions is signing up for emails from your favorite travel brands and following them on social media. Once you do that, you can watch out for opportunities to earn easy bonus miles that add up over time.

The bottom line

If you don't want a credit card or can't qualify for one right now, that doesn't mean you'll never be able to earn travel rewards. As highlighted above, there are quite a few ways to score points and miles if you're willing to do the legwork. But the spoils go to those who put in the effort, so start trying to earn bonus rewards today.

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This article is from Holly Johnson of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

How to Maximize Rewards Through Credit Card Shopping Portals

Holly Johnson — Tue, 30 Apr 2019 08:00:12 +0000

Rewards credit cards make it easy to earn points and miles for every dollar you spend. While some cards dole out points good for statement credits or gift cards, travel credit cards offer a different promise — the prospect of seeing the world at prices you can afford.

No matter what type of rewards you're after, however, there's one thing that's certain — the more points you rack up, the more freebies you'll score.

That's why credit card shopping portals are so important. They allow you to earn more points or miles for every dollar you spend, and with almost no effort on your part. (See also: Everything You Need to Know About Airline Dining Rewards Programs)

How credit card shopping portals work

What are credit card rewards shopping portals, exactly? For the most part, they're online hubs that let you earn rewards with participating stores.

Some credit card shopping portals are part of frequent flyer programs — American AAdvantage eShopping, Delta SkyMiles Shopping, and Southwest Rapid Rewards Shopping, for example. Others let you earn points or miles within specific credit card rewards programs.

No matter which portal you use, they work pretty much the same. Each portal requires you to log into your account any time you shop online, but earning points is as easy as "clicking through" the portal to shop at any participating store. You'll normally find popular retailers like Macy's, Home Depot, Walmart, Staples, and Best Buy.

Most stores that participate in shopping portals offer an extra one or two points or miles for each dollar you spend, and these miles will be automatically applied to your account shortly after an eligible purchase is made. (See also: How I've Scored Free Travel for 5 Years Straight)

How to earn more rewards through online shopping portals

There are additional details you should know if you hope to use shopping portals to their full potential. Here's exactly how you can get the most out of online shopping portals this year:

1. Double dip with a rewards credit card

The most important detail to keep in mind with shopping portals is that the points you earn are on top of rewards you earn with a rewards credit card. This means you can effectively "double dip," earning rewards not only through portal spending, but based on the card you pay with. Also, remember that you don't always have to pay for your purchase with a credit card that corresponds with the portal you're using.

2. Use the right rewards credit card

Of course, you should focus on using the right credit card if you hope to score more points and miles over time. Sometimes, the stars align and make it easy to earn a ton of points in a hurry.

For example, look for cards that might offer bonus categories that correspond with shopping portal purchases. If you have a cash back credit card that offers 5 percent back on up to $1,500 spent in categories that rotate each quarter, and the current bonus category is home improvement stores, it would make sense to use that credit card if you planned to click through a portal to earn bonus points at Home Depot, right?

The same is true whenever you have a credit card that offers more points for online purchases. Always assess your selection of credit cards to find the one that gives you the most points and miles for your purchase.

3. Keep your eye out for promotions

Also note that some credit card portals offer specific promotions from time to time, although this is mostly the case with airline shopping portals. United MileagePlus Shopping, American AAdvantage eShopping, and Alaska Mileage Plan Shopping frequently roll out promotions that let you earn additional points and miles if you meet a minimum spending requirement through their portals. While these deals can vary, they usually involve something like, "spend $200 in cumulative purchases through the portal and earn 500 bonus miles."

If you discover a promotion that coincides with a purchase that needs to be made, you can "triple dip" by earning regular portal rewards, promotional rewards, and points or miles with your rewards credit card.

4. Compare earnings on different portals

Before you click through an airline shopping portal, it's important to compare the various ones you use. While one might be offering one additional point for each dollar you spend, another might offer three points per $1 at the very same store.

Ideally, you use all the shopping portals that work with rewards programs you belong to. That way, you can take a few minutes to compare portal earnings before you shop.

5. Book "services" for even more rewards

Don't forget that shopping portals can work for other purchases you make online outside of regular shopping. You can also earn more points and miles booking specific services through portals, although the promotions change all the time.

Keep in mind these kind of bonus offers change frequently, so you must check in with the portals you use before you pay for any service or book anything online. You may never find bonus points for a service at a time you actually need it, but you'll never know unless you look.

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This article is from Holly Johnson of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

5 Ways Credit Card Rewards Can Cost You Money

Holly Johnson — Thu, 25 Apr 2019 08:00:10 +0000

Rewards credit cards offer an alluring proposition — the promise of free points and miles for each dollar you spend. Many rewards cards even offer signup bonuses worth $500 or more right out of the gate, and that's in addition to the rewards you earn when you shop or pay bills.

The problem? Not everyone can or should pursue rewards, for several reasons. In some cases, trying to earn rewards can even wreck your finances, damage your credit score, or both.

Before you sign up for a cash back credit card or travel credit card, it's crucial to know the many ways pursuing points and miles can hurt you.

1. Going into debt by chasing rewards

A recent analysis of credit card data from the Federal Reserve from Experian revealed that only 45 percent of Americans with credit cards are paying their balances in full each month. This means the other 55 percent carry a balance at least part of the time, and it's easy to assume at least some of those people are pursuing rewards, right?

Because the average credit card now comes with an APR over 17 percent, this is a real problem. It makes almost no sense to try to earn 1 to 3 percent back while also paying over 17 percent in interest. The math just isn't there.

If you're charging purchases you can't afford to pay off each month just for the rewards, credit card rewards are not for you. You'll be much better off using cash or debit instead since those options won't leave you grappling with high-interest debt. (See also: The 5 Biggest Dangers of Credit Card Debt)

2. Overspending to earn a signup bonus

Most cash back and travel rewards credit cards offer initial welcome bonuses to entice you to sign up. Many times, these bonuses are worth $500 or more in points or miles, and all you are required to do is meet a minimum spending requirement (e.g. spend $3,000 within three months of opening the account to earn 50,000 bonus points).

While these offers are tempting, they can be problematic if you need to spend more than you normally would to meet the threshold. If your normal spending and bills don't add up to the minimum spending requirement within the allotted amount of time, what are you going to do?

Way too many people use minimum spending requirements as an excuse to splurge for new furniture or plan a vacation. Unfortunately, this means the rewards they earn won't leave them ahead financially. They may wind up with new stuff or a trip to look forward to, but they also wind up with less money than when they started. There's nothing rewarding about that. (See also: 5 Smart Ways to Meet a Rewards Card Minimum Spending Requirement)

3. Unplanned travel spending

Another pitfall of travel rewards points is the simple fact you often have to spend money to redeem them. Let's say you sign up for a hotel or travel credit card that offers a free night certificate and initial rush of bonus points and you decide to cash them in for a week in Hawaii. All of a sudden, you're splurging for pricey flights, a week-long car rental, and food and fun for seven days. Sure, your hotel may have been free, but what was the total cost? (See also: How Travel Rewards Credit Cards Really Work)

Also, redeeming travel rewards can come with costs you may not anticipate outside of regular travel expenses. Cashing in airline miles for international flights can require you to pay several hundred dollars in airline taxes and fees, and some airlines tack on hundreds in fuel surcharges to boot.

Higher end hotels you redeem points with may also have unavoidable fees for valet parking or resort privileges. These expenses can and do add up over time, so don't forget to factor them in.

4. Too many annual fees

And what about the annual fees many of the top rewards and travel credit cards charge? Top travel credit cards charge annual fees of $450 or more, which is a lot of money no matter how you cut it.

While annual fees can be worth it if you earn a lot of rewards and use travel benefits and perks regularly, they still add up. Before you sign up for too many credit cards with annual fees, make sure you have a plan to get more value than you're paying for. If you can't do that, then it's probably not worth it.

5. Damage to your credit score

Don't forget that the way you use credit cards can negatively impact your credit score. For example, opening new credit cards means having another hard inquiry on your credit report, which could cause your score to temporarily drop.

Since your payment history makes up 35 percent of your FICO score, falling behind on your credit card bills can also create a big problem. With your credit utilization — how much you owe in relation to your credit limits — making up another 30 percent of your FICO score, carrying large balances can hurt your score as well.

The bottom line

Credit cards that dole out points and miles can help you score free travel, earn cash back, or get other freebies, but that doesn't mean they're destined to leave you better off. Ultimately, the way you use your credit cards will determine whether they're a net positive for your finances.

Before you sign up for a rewards credit card, it can help to have a basic game plan in place. Figure out how you can earn a big signup bonus without making unplanned purchases, and make sure you have the discipline to pay your balance in full each month. From there, make sure you're only paying annual fees on cards that are worth it.

If that sounds like too much work, then it probably is. Cut your losses and stick with debit instead.

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This article is from Holly Johnson of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Should You Finance a Tiny Home With a Credit Card?

Holly Johnson — Mon, 24 Sep 2018 08:00:12 +0000

While homebuyers of the early 2000s seemed to want enormous starter castles with every amenity imaginable, the last few years have brought on a renaissance in home building. Simplistic, efficient homes are becoming more popular as homeowners realize they need less space and want less responsibility.

Some homeowners have even taken their quest for less to the extreme by buying or building "tiny homes," or homes with less than 500 square feet of living space. Not only do these tiny dwellings offer less maintenance and upkeep for the homeowner, but they can make your life simpler, too.

Tiny home costs

The Tiny Life founder, Ryan Mitchell, says that, in addition to the simplicity aspect, tiny homes come with financial benefits that are hard to deny. Mitchell says that he's been in his tiny home for almost five years and pays only $15 per month in utilities. His "all in" cost of living is around $575 per month, including food, gas, insurance, phone, and other living expenses.

Of course, part of the allure of tiny homes is the fairly low upfront cost. According to The Tiny Life, building a tiny home with raw materials can cost as little as $23,000. Prebuilt or used tiny homes run the gamut from $5,000 to up to $75,000, on average, but they still cost considerably less than the national median home value of $218,000.

Financing options

The relatively low cost of tiny home living opens the door to a world of possibilities when it comes to financing, but the type of loan you'll need depends on the tiny home you buy. (See also: 9 Things to Consider Before Retiring to a Tiny Home or RV)

Mortgage

According to Fred Glick, CEO of U.S. Loans Mortgage Inc., homeowners who want to buy a small home that is permanently affixed to a foundation and sold with a lot will need to apply for a traditional mortgage for their tiny home unless they have the cash to pay for it outright. The mortgage application and closing processes would be exactly the same as if they were buying any other home in this case, with the only difference being the size of the home.

One big benefit of this strategy is that, with a traditional mortgage, tiny home dwellers may be able to qualify for a lower interest rate than they could get with other financial products.

Personal loan

Personal loans are also popular when it comes to financing tiny homes. Since most personal loans are usually available in amounts up to $35,000, they are often enough to cover the cost of a tiny home altogether. And since personal loans come with fixed interest rates, fixed monthly payments, and a fixed repayment schedule, these loans can mimic a traditional fixed rate mortgage. However, interest rates are often higher on personal loans since they are unsecured.

Cash

Mitchell says that many people also choose to build in stages and save up to pay in cash as they go. This way, they pay for their tiny home over a period of time and finish the project debt-free. This is exactly what Mitchell did when he built his own tiny home for around $35,000. Once he moved in, he says he was able to recoup the amount of money he had been paying in rent in less than two years.

RV loan

Another option to consider is an RV loan, says Brian B. Simmons, CEO of Ask a Lender. Since many tiny homes are on wheels, an RV loan for recreational vehicles is an obvious choice. Simmons notes that not all lenders offer RV loans, and that even those that do may not extend a loan to a tiny home. Still, you can always ask your bank or credit union.

Tiny home loan

There are also a handful of online lenders that offer loans specifically for tiny homes, including LightStream. LightStream claims to offer low interest, fixed-rate loans with no fees and repayment terms of 24 to 84 months for applicants with excellent credit.

What about paying with a credit card?

While there are several financing methods for tiny homes, Mitchell notes that some consumers who build or buy a tiny home seek out credit cards that offer 0% APR on purchases — at least for a limited time. With a card that offers zero interest, you may be able to pay for a tiny home to be built without any interest for 12 months or longer. If you can space your payments out and pay off your tiny home within the card's introductory offer period, you could cover the costs of a tiny home without any interest at all.

Some homeowners may also opt to pay for their tiny home with a rewards card that doles out cash-back or travel rewards. The rewards these cards offer provide a big incentive to use credit as payment, but there are risks that come with using this payment method, too.

Risks of financing with a credit card

One of the biggest downsides to using a credit card to pay for a tiny home is the very obvious potential for debt. Mitchell says that the majority of people who opt to live in a tiny home don't want debt in their lives, so using a credit card might work against their goals, unless they had a very specific plan to pay it off.

Since the average credit card interest rate is now around 17%, you'll also pay a lot of interest if you finance a tiny home with a regular credit card and pay it off over time.

Another downside of using a credit card is that, due to the sticker price of tiny homes, charging one to a card could hurt your credit. Barry Paperno, the former consumer affairs manager for FICO and the blogger behind Speaking of Credit, says that how much you charge to your credit cards is important — even if you have the credit limits available to cover the cost of a tiny home or any other large purchase. Since your credit utilization makes up 30% of your FICO score, charging a large sum can skew your utilization and cause your score to plummet.

This may not seem fair, but that's just how it works. Imagine you have a single credit card with a credit limit of $30,000 and you charge a tiny home with a purchase price of $27,000. Practically overnight, your credit utilization would go from 0% (provided you had no other debts) to 90%. With your utilization determining so much of your score, this is practically credit suicide.

Paperno says that you should strive to keep your credit utilization between 1% and 10% if you want to keep your credit score in tiptop shape. Anything more than that can hurt your score and your chances at getting a loan with the best interest rate and terms.

If you're entirely debt-free and only need to finance a tiny home, however, you may not care too much about your credit score in the short-term. Charging your tiny home to a credit card can make sense, but it's still smart to stay informed and understand the consequences.

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8 Things You Need to Know About Debt Management Plans

Holly Johnson — Wed, 19 Sep 2018 08:00:12 +0000

If you're in debt and struggling to dig your way out, you've probably spent a lot of time trying to come up with a fix. Maybe you transferred your balance to a balance transfer card to score zero interest, and wound up racking up even more debt. Perhaps you've resorted to selling stuff to raise extra funds. Maybe you picked up a part-time job or extra hours at work to keep up with your monthly payments.

Whatever you've tried, it's possible it's just not enough. Enter debt management, which is an arrangement to consider if you need outside help to manage your bills.

What's a debt management plan?

With a debt management plan, you work with a credit counseling agency who creates a realistic plan that can help you get out of debt. Typically, you deposit money each month with this agency, who in turn uses it to pay your unsecured debts on your behalf according to a payment schedule you agree upon.

When you get on a debt management plan, your creditors may also agree to waive certain fees or lower your interest rate. Obviously, these concessions could help you get out of debt even faster.

Still, there are details you should know and understand before you sign up for a debt management plan. These plans can be a lifesaver if you're struggling, but they're not for everyone. Here are some pros and cons you should be aware of. (See also: 5 Debt Management Questions You're Too Embarrassed to Ask)

1. Debt management is not a loan

While debt consolidation requires you to take out a new loan to consolidate your existing debts, debt management doesn't require a loan at all. "Debt management is a process for paying off debt through creditor concessions like interest rate reductions and late fee forgiveness," says Mike Sullivan, Director of Education and a personal finance consultant with Take Charge America, a national nonprofit credit counseling and debt management agency.

You're not taking out a new loan, but instead creating a long-term plan to pay off the loans you already have.

2. It can take up to five years to complete

Since debt management requires you to work with a credit counselor to create a realistic repayment plan, it can take a while to work your way through one of these plans. Sean Fox, co-president and CRO of Freedom Debt Relief, says debt management can take two to five years to complete, with the longer timelines typically reserved for those with the most debt.

That may seem like a long time, but remember that debt management intends to help you repay all the money you owe. If you owe a ton on credit cards and other loans, you can't expect your problems go away overnight.

3. Debt management can save you money each month

You may be wondering how debt management can help you become debt-free when you're barely keeping up with bills as it is. Fox says it's important to remember that you'll typically make just one monthly payment with a debt management plan, and that payment should be less than the total of all your debt payments now.

The lower payment is often the result of waived fees and negotiated interest rates, he says. Most of the time, your debt management plan will have you move excess funds resulting from lower monthly payments into a savings account.

4. It isn't free

While debt management is a solution that works for many debt-saddled consumers, credit counseling agencies that offer these plans do charge for their services — even if they're a nonprofit.

Fox says the monthly fees collected by enrolled consumers typically fall in the $10-$15 range. However, these fees are typically offset and more than made up for via savings gleaned from reduced interest rates.

5. Debt management should increase your credit score

One common alternative to debt management plans is something called debt settlement. With debt settlement, you work with a company (typically a for-profit) that offers to negotiate your debts down so you pay less than what you owe. One of the biggest downsides to debt settlement is the fact that debt settlement plans usually ask you to stop paying your bills, and that can cause your credit score to plummet.

"Debt settlement will always create a credit rating free fall," says Sullivan.

With debt management, on the other hand, your credit score should actually increase as the process moves along. This is because, over time, your credit utilization will go down as you pay off debt. Not only that, but the on-time payments made by your credit counseling agency (as you make your own payments on time) will make a positive impact as well. Since your utilization is the second biggest determinant of your FICO score and your payment history is the biggest factor, debt management can help you raise your score by default. (See also: 4 Ways to Make Debt Repayment Fun)

6. Debt management is not for everyone

While debt management plans can be helpful for consumers who see them through, they aren't the ideal option for everyone. Fox says that debt management is suited for people who are facing a less-severe financial hardship than a typical debt settlement customer. Generally speaking, this means consumers whose credit card debts are $7,500 or less, although there are plenty of exceptions.

For consumers with a lot more debt than this, you may need more than a reduced interest rate and debt management help to make any progress. Some may even want to consider bankruptcy.

7. You'll learn new money management skills

Kyle Winkfield, managing partner of wealth management firm OWRS Firm, says that debt management plans can help you learn to use credit to your advantage.

Creating a management plan for how to effectively and efficiently pay off debt is "the best case scenario for leveraging debt in your favor, building credit, and instituting financial discipline," he says. Once you've established a system and debt is being paid off, you also learn the valuable lesson that having less debt means having more money to save and invest. For that reason and others, "debt management is actually a great lifetime tool when properly structured and executed," he says.

Ideally, you will take the lessons you've learned paying down debt in a debt management plan and use them to avoid debt in the future. (See also: 15 Tips From People Who Paid Off an Incredible Amount of Debt)

8. You can do it on your own

Finally, it's important to note that many of the tasks debt management plans perform can be done by you. For example, you may be able to get your creditors to lower their interest rates and waive fees if you call and explain your situation. Whether you're using a debt management plan or not, you could also sit down and take a look at your spending and create a budget that could allow you to spend less and throw more money toward your debts every month.

If you're considering a DIY approach, Winkfield suggests starting with a comprehensive list of every creditor with updated balances and interest rates. You also need to know what your required monthly payments are. From there, you should track your monthly expenses to see if you have money available each month that can be redirected to eliminating debt.

Finally, you can create a debt repayment plan that will pay off all your bills over time. Many consumers like the debt snowball method where you focus on paying off your smallest debts first and make minimum payments on the rest, he says.

A debt management plan can do all of tasks with you, and may be the best option if you're feeling overwhelmed and need help to start. (See also: The Fastest Way to Pay Off $10,000 in Credit Card Debt)

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5 Smart Ways to Reduce Your Credit Card Interest

Jason Steele — Fri, 14 Sep 2018 08:01:09 +0000

If you've been trying to get out of credit card debt, you've probably heard about 0% APR credit cards that offer balance transfers. They are so well known that it can be disappointing every time you see a headline proclaiming some great idea about how to pay off your debt, only to find out it's just another description of interest free balance transfer offers.

While these offers can be incredibly valuable, they're only one of the ways you can reduce your credit card interest payments, and ultimately get rid of your debt. Here are five smart strategies that go beyond interest-free balance transfers.

1. Make multiple payments throughout the month

Every month, each credit card account issues a statement, along with a due date and a minimum payment. In addition to always paying more than just the minimum payment, you should also consider making more than a single payment each month.

Credit cards incur interest charges based on your account's average daily balance, and anything you can do to reduce the balance each day will reduce your interest charges. If you can make an additional payment before the due date, you'll lower your average daily balance. (See also: The Fastest Method to Eliminate Credit Card Debt)

2. Pay your balance early

Even if you can't make multiple payments throughout the month, just making your payment a week earlier will save you money. When the payment gets credited to your account, the average daily balance will be lower from that day forward. (See also: 6 Smart Reasons to Pay Your Credit Card Bill Before It's Due)

3. Wait to make big purchases

You can avoid interest charges by paying your statement balance in full every month. But if you aren't sure you'll be able to do that next month, there's a little trick you can use to reduce your next statement balance. Find out when your statement closing date is, and postpone large purchases until after that date. Charges processed after the end of your statement will appear on your next statement, giving you an additional month to pay it in full. And even if you incur interest, every day you can postpone making a large purchase will reduce your average daily balance. (See also: How a Simple "Do Not Buy" List Keeps Money in Your Pocket)

4. Keep a "clean card" that you pay in full each month

When you have to carry a balance, the smaller the balance, the less interest you'll incur. One strategy to reduce your balance is to put some charges on a different credit card, one that you can avoid interest charges on by paying in full each month. For example, let's say you need to spend a total of $1,000, but you charge $500 to two different cards. Pay one off in full, and you will have avoided much of the interest you would have paid if you charged the entire $1,000 to a card and only paid off half of it. (See also: 6 Secrets to Mastering the Debt Snowball)

5. Ask for a lower interest rate

Your credit card's interest rates were set based on your creditworthiness when you applied for your account. But that could have been a long time ago, and your credit may have improved since then. If you have a strong record of making on-time payments, then it's possible that you may qualify for a lower standard interest rate. Furthermore, it never hurts to ask. Contact your card issuer and ask for a lower rate. You may even let them know that you're considering transferring your balance elsewhere. Credit card users are very profitable customers, and banks will often make special offers when they fear losing your business.

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This Is When It Pays to Stay Loyal to a Rewards Credit Card

Holly Johnson — Tue, 11 Sep 2018 08:00:11 +0000

The best travel and rewards credit cards offer a tantalizing game of risk. If you can charge your purchases and rack up rewards without carrying a balance or paying interest, you usually win. If you overspend with credit and wind up in debt, on the other hand, you lose the game — and will pay through the nose.

Still, there are more facets to this game that extend far beyond the risk of debt. If you choose your rewards and travel cards wisely and use them strategically, you can earn a lot more points and miles over time. Staying loyal to a brand can also help you make the most of your efforts, but only in certain situations.

This is why it's important to know when loyalty pays off. Here are some scenarios where sticking to one rewards credit card or one loyalty program can work in your favor.

When you can reach your redemption goals faster

Staying loyal to a rewards brand can pay off by helping you reach optimal redemptions faster. For example, let's say you mostly stick with flexible rewards programs that let you transfer points to your favorite airline loyalty program. If you were to focus all your spending with one brand of cards that lets you transfer miles, your collective efforts with a single card brand would let you rack up points you can transfer a lot faster than attempting the same thing with several cards from different brands.

Or perhaps you're loyal to a single airline or hotel loyalty program. So, imagine you want to fly first class with a particular airline to Europe for 115,000 miles round-trip. It might be difficult to secure this redemption if you were earning miles and sign-up bonuses with several airlines within a year. However, it would be a much easier task to earn the miles for this flight if you specifically used that airline's co-branded credit card, cashed in any sign-up bonuses, and flew mostly with that airline for a while.

When you can earn free hotel stays

There are also situations in which pooling your points can help you earn better redemptions. One example is with hotel loyalty programs that let you earn a fifth night stay for free. With fifth-night-free promotions, keeping all your hotel in points with one brand makes a lot of sense since you get to book five nights for the price of four. (See also: 6 Ways My Family Scores Free Travel With Credit Cards)

However, this only works when you have enough points to book four consecutive nights, which may not happen if you're enrolled in several hotel programs at once.

When you can earn category bonus points

If your goal is earning a ton of points and miles, you need to make sure you're maximizing the travel cards you have. By and large, this means using the right card for the right purchase and making the most of category bonuses when you can (e.g. using a card that offers bonus points on dining when you eat at a restaurant).

Take the guesswork out of that by downloading an app like Reward Summit. This service will take a look at your rewards cards before you make a purchase and tells you which card would be optimal based on the rewards you will earn.

When you strategically pursue sign-up bonuses

While ongoing rewards can be lucrative, credit card sign-up bonuses are where the real value is at. Many cards let you earn bonuses worth $500 or more just for spending $3,000 or $4,000 on your card within a few months.

To get the most out of these offers, expect to sign up for a new rewards card with your preferred card issuer or rewards program every year. This way, you're always working toward a minimum spending requirement and a big chunk of cashback, airline miles, or flexible travel rewards.

When you get your spouse or partner on board

Remember that you don't have to chase sign-up bonuses or ongoing rewards alone. Your spouse or partner can earn the same rewards you are, including sign-up bonuses — and this is true even if you share the same address.

When you get your spouse involved, you can easily earn double the rewards in the same amount of time. You could even do better if you're able to pool your points with a spouse for optimal redemptions. (See also: 9 Surprising Ways Marriage Can Make You Richer)

When you pay all your expenses with credit

Don't forget the importance of paying all or most of your bills with credit — at least the ones that don't charge a fee for paying with plastic. This should include bills like groceries, gas, insurance premiums, utility bills, and dining out. The more expenses you can pay with a rewards card, the more points and miles you will rack up by default.

When you pay your balances in full

It's important to remember the ultimate credit card hack: Paying your balances in full every month. None of these tips and tricks will work in your favor if you're carrying a balance and paying credit card interest every month. With the average credit card now charging over 17% APR, that interest will wipe out your rewards and then some. (See also: 15 Ways Your Life Is Better When You Have Good Credit)

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6 Steps to Getting a Credit Card When You Have Bad Credit

Holly Johnson — Thu, 06 Sep 2018 08:00:10 +0000

It may not be easy to get a credit card with bad credit, but the effort you put forth to do so will be worth it in the end. Good credit is the key to being able to buy a home or finance a car, after all. When your credit rises to the "very good" or "excellent" level (typically a FICO score of 740+), you'll qualify for loans with the best interest rates and terms.

But how do you get a credit card with poor credit? It takes time and perseverance to get approved when you haven't yet proven yourself, or if you've struggled with credit in the past, but it's also hard to prove yourself when no one will give you a chance.

Still, you can get a credit card with bad credit if you're willing to spend time fixing your credit first. Here are the most important steps you should take along the way.

Step 1: Find out how bad things really are

Your credit may be terrible, or you might just assume it is. Either way, you need to find out for sure. Gerri Detweiler, education director for Nav, a company that helps business owners build and monitor strong business credit for free, says step one is checking your credit score — but not just any credit score.

Specifically, Detweiler says you should strive to check your FICO 8 score — one of the many credit score types lenders use. Typically, this is the one card issuers check before approving people for a credit card, she says.

Seeing your FICO 8 score is "not crucial, but it's helpful to see where you fall using this scoring system that card issuers actually use," she says. Another option is checking a free credit score offered through your bank (if applicable) or signing up for a free account with a service like Credit Sesame or Credit Karma to see an estimate of your credit score there. (See also: I Checked My Credit Score in 11 Places — Here's What I Learned)

Step 2: Consider other credit factors

In addition to your credit score, Detweiler says card issuers want to make sure you don't have an open bankruptcy. "If you have an open tax lien, that could also be a disqualifier," she says. In either of these cases, a credit card might not be possible until the situation is far enough in the rearview mirror.

Another common reason you'll get denied is the fact that issuers don't want to see more than six inquiries within the last six months, according to Detweiler. If you've been applying for a bunch of cards, wait to apply again until all your current inquiries are more than six months old.

Also, many card issuers don't want to see credit utilization higher than 60 percent — and they would prefer you have at least one credit card already.

"Most issuers want to see that you already have at least $500 or $1,000 in credit limits on other credit cards, which is a Catch-22," says Detweiler. If you do have high credit card balances already, paying down some of your debt should help your case.

Step 3: Take a close look at secured credit cards

If you have checked your credit and know you can't get approved for an unsecured credit card, you should consider getting a secured credit card. What's the difference? Where unsecured credit cards extend a line of credit without collateral, secured credit cards require you to put down a cash deposit upfront.

This may not be ideal, but secured cards do report your credit movements to the three credit reporting agencies. Ultimately, this is what you want. If you decide to go this route, make sure you're comparing secured cards to find an option with no annual fee, no ongoing fees, and other perks.

Step 4: Look into credit repair options

Detweiler says you can still work on your credit in other ways whether you get a secured credit card or not. "If you don't feel confident trying to figure out what's not accurate or complete on your credit report, then you could look into some inexpensive credit repair with an agency," she says.

Once again, this is an area where you'll want to do your homework. Look for a credit repair company that is reputable, has good ratings, and has very low costs. Also read the fine print and ask questions so you know what you're getting into. Be aware of credit repair scams, as there are many out there.

Step 5: Get added as an authorized user

Another really good way to get a credit card with bad credit is to get added as an authorized user by someone you know well and trust who has a perfect payment history and low debt. "Maybe it's a relative, a friend, or a spouse," says Detweiler.

This isn't the same as getting your own card, but it can help improve your credit since the primary user's payments will be reported on your credit history as well.

If the primary user is worried you'll get in trouble using the card, you can also get added as an authorized user but never use the card or hold it in your possession. The benefit still exists since the main cardholder will continue using their card and making payments.

Detweiler says it may also be possible to get a co-signer for a credit card, although "most banks don't even do this anymore." Co-signing for a credit card may be seen as riskier for the person who needs help with their credit since both parties are jointly responsible for the debt either one charges. On the flip side, authorized users aren't responsible for repayment of debt.

Step 6: Consider alternatives

Finally, there are a few alternatives to consider. Detweiler says that, if the major card issuers aren't willing to accept you, you could try applying for a credit card with a credit union you have an existing relationship with.

Prepaid debit cards are another option, but "this isn't an ideal substitute for a credit card," says Detweiler. Not only do prepaid debit cards not help you build credit, but they don't offer many perks. For example, you'll have no ability to dispute purchases, fewer consumer protections, and more exposure in the case of fraudulent use. Prepaid debit cards may also have fees for transactions and deposits, so make sure to compare options if you sign up for one.

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5 Reasons You Can Be Denied for a Credit Card Even With Good Credit

Holly Johnson — Mon, 27 Aug 2018 08:00:11 +0000

When you pay your bills on time, don't max out your credit cards, and focus on building different types of credit, you're normally rewarded with a good credit score. It may take a while to get there, sure, but the recipe for good credit is mostly the same for everyone.

Your credit score may also matter more than you think, mostly due to the array of benefits that await those with good credit. Not only can very good or excellent credit (scores typically 740 or higher) help you get the best rates on a car loan or home loan, but this status may even help you score lower insurance rates.

Now, here's the bad news. Great credit doesn't guarantee you'll qualify for any loan or credit card you want. This is true even if your credit score is 850, which is the highest score anyone can achieve within the FICO base scoring method.

According to FCRA certified credit expert John Ulzheimer, this can catch people by surprise because they assume perfect credit is the ticket to all the credit they want. Not so fast. There are actually several reasons you can be denied a credit card or another type of loan even if your credit score is sky high.

1. You don't have an income

As Ulzheimer notes, the Card Act of 2009 requires card issuers to verify an applicant's income and ability to repay. For that reason, someone without money coming in may struggle to qualify for a credit card or any other type of loan.

This reason for denial is understandable since card issuers want to know they'll be paid back for any money you charge, but it may be a tough pill to swallow for people with great credit and other positive factors.

However, there's one way to sidestep this requirement if you don't earn an income but someone in your household does, says Ulzheimer. Most credit card applications ask for your "household income," even though many people may be inclined to enter their personal income. If you're a stay-at-home dad but your wife works, for example, this little detail allows you to list your household income and potentially qualify — even if you're not earning anything on your own. (See also: 6 Ways to Boost Your Partner's Bad Credit Without Risking Your Own)

2. You've had trouble with credit in the past

Let's say you have excellent credit now, but it wasn't always this way. If you had financial issues with a card issuer or lender in the past, but have repaired your credit since then, you may be denied no matter what you do.

"Credit card issuers have a really good memory," says Ulzheimer. "If you have ever discharged debt in a bankruptcy with them, they will remember — even if you have rebuilt your credit score." (See also: How to Rebuild Your Credit in 8 Simple Steps)

3. Your credit utilization is too high

Credit utilization is the second most important determinant of your credit health, making up 30% of your FICO score. The more you owe in relation to your credit limits, the more likely your score will take a hit.

Still, Ulzheimer says there is an in-between area where you can be denied a credit card with good credit simply because your utilization is high. While he wouldn't expect "someone who is highly utilized to have a super high credit score," people with respectable credit scores are denied credit all the time for this reason.

"When you owe too much, then the issuers don't want to stack more debt on top of you," says Ulzheimer. If you want access to more credit, you'll probably need to pay your balances down. (See also: The Fastest Way to Pay Off $10,000 in Credit Card Debt)

4. Your credit is just "too good"

Ultimately, there are times when people with really high credit scores can be denied credit because they are seen as unprofitable. Maybe a person hasn't carried a balance on a credit card in years and they also prepay their mortgage religiously. Or, perhaps they have a long history of only carrying a balance on extremely low rate loans, such as a car loan that comes with 0% APR due to a promotion.

"At the end of the day, card issuers are looking for consumers who are going to provide them with revenue or income — not just a good credit score," says Ulzheimer.

5. You have too many hard inquiries

There's another reason you may be denied a credit card with really good credit: too many hard inquiries. Ulzheimer says applying for too many cards within a short amount of time is seen as a bad thing since it typically means the consumer is trying to get more credit they can use or applying for rewards cards just to get the bonuses.

If you are trying to access huge amounts of credit all at once, this could look as if you want to rack up balances you never plan to repay. If you're signing up just for bonuses, on the other hand, it means you're likely to be an unprofitable customer.

That second part of the equation has become a bigger problem than it used to be over the last few years. Consumers actively pursuing new credit cards for sign-up bonuses have faced a lot more denials from different card issuers who are catching on and trying to deter this strategy.

Signing up for new rewards cards typically means "you're taking advantage of loopholes and credit card rewards with no plans to use the cards on a long-term basis," says Ulzheimer. This isn't illegal, but it does mean card issuers may not want to extend credit to you.

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What Is a Rewards Credit Card?

Jason Steele — Wed, 22 Aug 2018 08:00:10 +0000

The credit card industry is intensely competitive, and profitable. In order for them to remain profitable and attractive to consumers, banks and credit unions offer cards that return something of value for each dollar spent. These credit cards have come to be known as rewards credit cards.

What rewards cards offer

A rewards credit card will give the customer a percentage of their spending as cash back. Depending on the card issuer’s rewards program, the cash back can be received as a statement credit, a bank deposit, or a credit to purchase gift cards and merchandise.

There are also travel rewards credit cards that offer rewards points or miles. This kind of loyalty program may be offered by the card issuer, or it may be with a co-branded partner such as an airline or hotel chain. Customers are then able to redeem their points and miles for a variety of rewards through that company. For example, credit card points can be redeemed for free stays in a hotel, while airline miles can be redeemed for award flights according to the airline’s frequent flyer program. (See also: Cash Back vs Travel Rewards: Pick the Right Credit Card for You)

But cash back and points aren't the only perks card issuers offer. Many cards come with a welcome bonus as an incentive to open a new account. Typically, these offers require you to meet a minimum spending amount to receive the bonus. For example, some cards offer 50,000 points or miles after spending $3,000 within three months of opening the account.

These credit cards will also offer extra rewards for your spending. Some cards offer a fixed amount of points, miles, or cash back on all purchases, while other cards will offer increased rewards on purchases from select merchants or categories. And some cards will cap the amount of bonus rewards you can earn each quarter or year. (See also: The Best Cash Back Credit Cards)

How to get approved for a rewards credit card

The most competitive rewards credit cards are offered to applicants with the strongest credit history and the highest credit scores. Someone who is new to credit cards, or has had credit problems in the past might not qualify for a premium credit card that offers the most valuable rewards for spending.

However, there are some rewards credit cards that are offered to those with good or average credit, rather than excellent. In fact, there are even a few subprime and secured rewards cards designed for those with poor credit that still offer nominal rewards. The rewards these cards offer won’t be as generous as those from cards offered to applicants with excellent credit, but it's better than nothing.

What are the annual fees for rewards credit cards?

Rewards credit cards can have no annual fee, or they can have annual fees of hundreds of dollars. Since many credit card users would prefer not to pay an annual fee under any circumstance, credit card issuers will typically offer several rewards credit cards with no annual fee.

There are also premium rewards credit cards that have several levels of annual fees. There is a large market for credit cards with annual fees of under $100, including cash-back cards, and those that offer points and miles with airlines and hotels. Next, there are the premium cards that offer annual fees above $100, with several of these products charging annual fees of $450 or more.

How points and miles work

Many credit cards offer rewards in the form of points or miles, and these artificial currencies can be generated by the card issuer or one of its co-branded partners. Some card issuers also allow their rewards to be transferred to points or miles with airlines and hotels. With most rewards credit cards, however, the card issuer will allow you to earn points or miles with a third party, such an airline, hotel chain, or retailer.

Once you receive those points or miles, they are now in the account of the third-party partner, not the credit card. You will retain those points or miles even if you cancel your card, and the rewards are now subject to the terms and conditions of the company that they are with. You will be able to redeem your points and miles according to the terms of that program, and the points you earn from your rewards credit card will be added to any other points you have. For example, if you earn airline miles by traveling on a certain carrier, you could also earn miles from using their co-branded credit card. The miles from both your travel history and your credit card rewards both go into the same frequent flyer account, and you will retain these miles even if you decide to close your credit card account.

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This article is from Jason Steele of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

2-Minute Read: What You Need to Know About Cash Advances

Jason Steele — Mon, 13 Aug 2018 08:00:12 +0000

You need cash now, but you don't get paid for a few more days. You always have the option of getting a cash advance through your credit card, but should you? Any time you use your credit card to receive cash from an ATM, it's considered a cash advance rather than a purchase, and that distinction is an important one. Before you make that transaction, here's what you need to know about cash advances.

Most credit cards have a cash advance fee

When you make a cash advance, your credit card will usually add a cash advance fee. This kind of fee could be $10, or 5% of the amount of each transaction, whichever is greater. So if you needed $20, for example, you'd have to pay an additional $10 fee. (See also: How to Reduce the Costs of a Cash Advance)

Credit cards charge a higher, cash advance interest rate

Since cash advances are seen as having a higher risk of default than purchases, most credit cards will impose a higher interest rate on cash advances. While credit cards have an average interest rate of about 16% APR, it's common to see cash advance interest rates in the 22% to 30% range. (See also: 7 Times You Definitely Will Be Charged Credit Card Interest)

There's no grace period on cash advances

If you want to avoid the higher cash advance interest rates by paying off your statement balance in full, that won't work. Unlike purchases, interest on cash advances won't be waived by paying your statement balance in full. This means that you'll be incurring interest on your cash advances from the day they're made until you make a payment.

Thankfully, any credit card payments above the minimum will be applied first to the balance with the highest interest rate, which is likely to be the cash advance balance. If you have to make a cash advance with your credit card, make a payment as soon as possible to minimize your interest costs.

You can still be charged foreign transaction and ATM fees

In addition to the credit card cash advance fees and cash advance interest charges, you can still be charged foreign transaction fees of up to 3% when you make a cash advance outside of the United States. In fact, you can incur foreign transaction fees even when you make an advance in U.S. Dollars. Finally, the ATM owner can also impose a fee for using its machine. (See also: The Best Credit Cards to Use While on Vacation)

By understanding all the costs of credit card cash advances, you can take steps to find less expensive ways to access cash.

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This article is from Jason Steele of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Why the Best Credit Card Rewards Strategy Is a Slow One

Holly Johnson — Fri, 10 Aug 2018 08:00:11 +0000

For those who rush into the credit card rewards game, the consequences can be severe and long-lasting. After all, average credit card debt per indebted household stood at $9,100 in 2017. While some of that debt is probably the result of emergency spending, it's inevitable that some of it also comes from poor planning.

A former neighbor of mine recently told me how she racked up debt in pursuit of rewards. In the midst of a move across the country, she signed up for a travel credit card that would let her use miles for flights or transfer to airline partners. She was going to spend money on her move either way, so why not get something in return? She was going to pay off her balance right away — or so she thought. What could go wrong?

As life would have it, the mother of two faced higher moving expenses than anticipated. She also struggled to find a good job right away, which left her relying on credit to pay other bills. In the end, she wound up with a ton of debt and some negative marks on her credit report.

Now she's stuck trying to pay off credit card debt at a high APR until she can qualify for a balance transfer card with 0% APR for a limited time. It's easy to see what went wrong here; she used credit card rewards without a real plan in place — and without enough cash to cover her bills or an emergency.

The potential for debt is one of the major pitfalls of credit card rewards, but there are plenty of other reasons you should approach this strategy at a snail's pace. There's a lot that can go right if you win the game, sure, but there's even more that could go wrong. Here's why you should proceed with caution.

Credit cards may cause you to spend more

While many people who pursue credit card rewards say using credit doesn't change their spending habits, some academic research suggests that, at least for some of us, spending habits can change quite a bit.

One study published in the Journal of Experimental Psychology: Applied in 2008 noted that the immediacy of paying with cash affected people much differently than the delayed consequences of paying with credit. In an excerpt published in Psychology Today, the argument was that "the more transparent the payment outflow, the greater the aversion to spending or higher the 'pain of paying' … leading to less transparent payment modes such as credit cards and gift cards (vs. cash) being more easily spent or treated as play or 'monopoly money.'"

In other words, credit cards dull the pain of paying. They do this by delaying the timeline in which you have to pay your bill and by allowing you to mix your purchases in a way that causes you to forget exactly what you're buying.

If you sign up for a bunch of rewards cards without knowing whether you can use them like you would cash, you may find out the hard way that you're someone who overspends with credit. This can be a costly lesson, but you can minimize potential damage by taking your time with rewards cards and using them in moderation at first.

Juggling too many new cards can lead to reckless spending

One of the main drivers behind rewards card sign-ups is the initial bonuses they offer. Many cards offer hundreds of dollars in cash back or travel credit for spending a specific amount of money within a few months (e.g. $3,000 in three months). These bonuses can be lucrative, but they can also cause people to overspend to reach the required spending minimum.

Juggling too many new cards at once can also leave you in a position where you have to spend more to earn each of the bonuses you're after. If, for example, you signed up for three cards that required you to spend $3,000 in three months to earn the bonus, you'd be on the hook for $9,000 in spending at once. Could you pull it off without jeopardizing your financial health? Maybe, but maybe not.

You're better off pursuing only one bonus at a time and making sure you can reach any spending thresholds naturally with regular purchases like groceries, gas, insurance, and utilities. After all, buying stuff you don't need to earn a credit card sign-up bonus is unlikely to leave you in debt. (See also: 5-Minute Finance: Track Your Spending)

New credit cards can hurt your credit score

Another reason to approach credit card rewards carefully is the fact that getting too many credit cards at once can actually hurt your credit score. Keep in mind that "new credit" makes up 10% of your FICO score, and it's easy to see why. New credit cards may cause credit reporting agencies to believe you are a greater risk, and they may push your score down accordingly.

In addition to new credit, the length of your credit history also makes up 15% of your FICO score. Since getting new cards will cause the average length of your credit score to drop, this is another factor that can hurt your credit in the short-term. (See also: How to Rebuild Your Credit in 8 Simple Steps)

It takes time to build good credit habits

Finally, don't forget that it takes time to build positive financial habits — including the ability to use credit responsibly. If you jump into credit cards too soon, you might wind up in the middle of a problem you don't know how to fix.

The best way to use credit cards is in conjunction with a monthly budget. You can charge your purchases each month to earn rewards, but you should have the cash on-hand to pay your bills since the average credit card interest rate is over 16%.

It also helps to build an emergency fund you can use to cover unexpected expenses or fill the gaps if your earnings drop for any reason. If you use credit without a plan, you could live to regret it and wind up in debt for a long, long time.

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This article is from Holly Johnson of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread: