Credit card issuers often face criticism because of the high interest rates and penalty fees they charge.
But savvy consumers can also take advantage of some of the good things that card issuers offer, such as extra cash or points bonuses on your purchases.
It’s basically free money if you use credit responsibly.
The few big banks left in the business fight hard for every new customer — and to hold on to the ones they already have.
Case in point: My wife and I have separate accounts with one cash-back card issuer but use my card exclusively because it’s easier to keep track of our spending and faster to earn the cash on one account than two. It would take twice as long to redeem the $20 minimum cash back if we used two cards.
But she recently received a letter from the bank with a terrific offer: For the remainder of the month, she could earn $1 cash back on each of the first 15 transactions, in addition to the regular 1% cash-back reward.
We thought it was obvious what to do: Put my card away and use hers until the end of the month.
Let’s say we use her card 15 times, with an average purchase of $50. That’s easy enough to do.
At the end of the month, we figure we’ll have earned $22.50: $1 each on the first 15 transactions and another $7.50 from the regular 1% cash back. That’s enough for two entrees at many restaurants.
That works out to 3% cash back, compared to just 1% if we had ignored the mailer and continued to use my card.
My wife had another good reason to take advantage of the offer: to remind the card company and the credit bureaus that she’s still around! Believe it or not, not using your available credit for a long time can hurt your credit score — not a lot, but a little.
This seemed like a no-brainer to us, but there are probably reasons why some people shouldn’t do this and should just stick to one card.
So if you can answer yes to any of the following questions, maybe this isn’t the right strategy for you.
Do you have too many card accounts open or use too many cards? I know from experience it can really get confusing if you’re using too many cards. Confusion often leads to missed payments, and too many cards often leads to overspending.
Are you trying to earn rewards on numerous cards? You’re probably better off concentrating on one card, or two at the most; maybe one to earn cash and one to earn airline miles. Trying to earn rewards on too many cards only increases the time it will take you to earn enough rewards to redeem them.
Do you really want another bill to pay? If your monthly stack of bills just keeps getting higher and the thought of adding another to the pile bothers you, then maybe you should just stick to your first card.
Are you carrying a balance on more than one account? If you have to carry a balance, always consolidate your balances into one account with the lowest rate of interest you can qualify for. Don’t add to the balance by charging up another card.
Are you in danger of maxing out your credit cards? Stop using credit cards immediately and start paying cash until you get your spending under control.