[ad_1]
(Metro Creative Connection)
There is no such thing as a universal best credit card. The card that’s right for you depends on your lifestyle, goals, and credit history. For example, if you’re looking for travel rewards but your friend is building credit, the best card for each will vary greatly.
According to a 2021 Experian study, the average American has about 3 cards, but they often have the wrong card in certain situations.
Here are 8 ways you might be using the wrong credit card and what you can do instead.
1. Still using the starter credit card
You may have started by building your credit with secure cards, student cards, or alternative cards, but once your credit is in better shape, it may be time to upgrade.
By keeping your usage low and paying your balance in full every month, you might get a better card if you used your starter card responsibly. Using a different card may result in a higher credit limit, higher reward earnings, and offers such benefits as cell phone protection and travel rewards. Some card issuers may automatically upgrade your card once you reach a certain threshold, but some do not. Please contact the issuer to check your options.
2. Not using enough cards to get the signup bonus
New cardholders can often get a lucrative welcome bonus, but they usually have to be careful. To earn it, you have to spend a minimum amount within a certain period of time. Be aware of the card’s sign-up bonus usage requirements and use your new credit card well before the deadline. If he continues to pay with the card, he risks missing out on the bonus if he doesn’t spend enough on the new card.
A little planning helps. Think about the big purchases you need to make in the future, such as car repairs or a new laptop. One of them alone may be enough to meet the bonus spending requirements.
3. Those who use store-only cards
It is true that a store credit card can save you money, especially if you frequently make large purchases at that store. However, rewards earned on store credit cards are often only redeemable at that store, limiting their usefulness.
Most shoppers are better off using generic rewards credit cards to get more flexible rewards. Some cards offer better rates on online shopping purchases, while others offer as much as 5% back at popular merchants like Target, Walmart and Amazon.
4. I didn’t know that the 5% card was an extra hassle
Several cards boast top 5% cashback rates in popular spending categories such as grocery, restaurants and gas. The problem, though, is that you have to do some work to earn that rate. Most of the time you need to track categories. Eligible 5% purchases may need to rotate quarterly or select your own category. If you’re spending outside of these categories with this card, chances are you’re getting just 1% instead of the juicy 5% you think you’re getting.
In most cases, even if you’re spending in the right category, you’ll need to activate the bonus category before the issuer’s deadline to get the 5%. Additionally, you may face spending caps in these 5% bonus categories. Once these caps are reached, the reward rate drops to 1%. For those who find the 5% card expensive to maintain, choose a card that allows you to earn a flat rate of her 2% cashback on each purchase instead.
5. Wrong card name
According to a 2020 NerdWallet survey, 14% of Americans view credit cards as “complicated,” and it’s not hard to see why. Some issuers offer a series of cards from the same family, with nearly identical names. Even the logos of some issuers are strikingly similar. Run a quick audit of your credit card to make sure it’s the one you intended to get. Cards that look and sound nearly identical may be worlds apart when it comes to fee and reward structures.
6. Regularly make purchases using a balance transfer card
A balance transfer card is a great tool for paying off debt. Consolidate multiple debts in one place for easier management and pay off interest for months. However, if you use the balance transfer card for daily expenses, it is difficult to make the balance zero. Additionally, many balance transfer cards do not come with perks. Leave your balance transfer card at home, but carry your cashback card with you. Make regular payments for both.
7. You are not using the correct card for the purchase
It is useful to know the reward rates of all credit cards. Suppose you have two credit cards. One earns 4% on gas bills, the other only 1%. Every time he fills up with gas, he uses the 4% card, which gives him an extra $30 in profit if he pays $1,000 for gas a year. That $30 may not seem like much, but it’s a small amount, especially if you have multiple rewards credit cards. Label your cards with sticky notes or keep a small reference guide in your wallet to keep track of different reward rates.
In many cases, you should also have a spending limit in mind. Issuers usually cap their earnings with the highest reward rate once they reach a certain amount of spending in a particular category. Track your progress towards that cap, and when you reach it, switch to another card with a higher rate until the cap is reset.
8. Never use credit cards
Although they may look and feel almost the same, debit cards are very different from credit cards. Credit cards offer protections and benefits that debit cards (and cash) do not. Earn cash back and other rewards with your credit card that you can’t get with your debit card. A lost credit card is often easier to recover than a wallet full of cash. More importantly, using your credit card responsibly can help you save money by boosting your credit score, favorable loan terms and insurance rates, and more.
Learn more about NerdWallet
[ad_2]
Source link