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Which Credit Card Debt Should You Pay Off First?

If you have a number of credit cards with balances on them, you might feel overwhelmed by having a large number of monthly payments or a total balance that is higher than you are comfortable with. If you have finally decided that it is time to take action and pay off some of this debt, there are several different ways to approach the task.

While each will get you ahead financially, it’s important to understand that they offer different advantages. Let’s discuss some of the common ways that you can pay off your credit cards and get ahead.

Determining Where to Start

There are several ways to approach the problem. Different strategies will appeal to different people. Think about the debt that you have, and what you think will help you most.

For some, paying less interest is important. Other people find that minimizing the number of monthly payments is important. For others still, freeing up liquid cash each month matters most. Some people might choose to use one of the best balance transfer credit cards to help them focus on one payment.

There is no “one size fits all” type of plan. Consider which part of your credit card debt bothers you most and then consider the options below.

Highest Interest Rates First

Many people aim to pay off the credit card with the highest interest rate first because this means that they will be paying lower interest in the long run. If the idea of paying a lot of interest is the part about your debt that bothers you most, this is a good place to start. Often store cards have higher interest rates, and many people will opt to begin by paying these off.

Importantly, you should review the interest rates for all of your cards. Ensure that you are not paying a penalty APR for making a late payment at some point. If you are paying a credit card balance that has a high-interest rate, such as over 22%, you probably want to focus on getting rid of this kind of debt first.

Highest Balance First

Some people become worried when they have a credit card with a large balance or one that is nearing the credit limit. Focusing on putting some extra cash toward payments on these cards can help minimize the stress of having credit card debt. When you put extra money toward this card each month, you will be able to watch the balance drop, getting you closer to financial freedom.

It can be very motivating to watch that high balance get a little lower each month. You may be inspired to devote even more of your extra cash to this project, therefore paying it off more quickly.

Pay Off Smallest Balances First

For some, paying off the smallest balances first can help to eliminate the number of monthly payments that must be made. The fewer the payments that need to be sent out, the less likely it is that you might accidentally forget or miss one and end up with a late payment penalty fee. Plus, as you pay off these smaller-balance cards, you will slowly have more money to make payments on the larger-balance credit cards. Close the credit cards that you don’t plan to use—unless you have had them for a long time and have a great credit history with them.

Final Thoughts

Understanding your credit is important. Keeping track of your credit cards and balances and making all of your payments on time is critical to your financial health. Each of these strategies can help you get closer to being debt free. Plus, each has their advantages.

Make a plan of attack by making a list of all of your debts. Go into detail listing monthly payment options, total balance, interest rate, etc. Then make a plan and stick to it. You will be delighted when you start to see progress!

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How To Prevent Your Card Being Canceled By Credit Grantor

Not everyone uses their credit cards on a regular basis. Imagine the shock of needing to use your credit card only to find that it has been canceled by a credit grantor. You hear horror stories of people vacationing overseas and discovering this problem, then spending hours trying to fix it.

Unfortunately, the credit card grantor reserves the “right” to cancel or change the terms and conditions at any time. While they are supposed to notify you, this could be lost in the mail, sent to your email spam folder, or simply overlooked.

There are a few main reasons why your credit card might be canceled by a credit grantor. Let’s review the most common ones to prevent this from happening to you.

Not Using Your Credit Card Enough

A credit card company issues a card to you so that they can make money. Not only will they make money when you pay interest and fees, but they do make a small amount of money on each transaction that you use the card for.

This is the most common reason for a credit card to be canceled.

When you do not use the card at all, or only for emergencies, the credit card company makes no money from having you as a customer. Fortunately, this is a problem that is extremely easy to avoid. Simply use the card for the occasional purchase. Try to use it at least once every few months so your account will remain open and active.

You can always use one of the best credit cards with no annual fee to help you keep your account active without having to worry about coughing up the money for any fees.

New Debt

Have you recently taken on new debt? Bought an expensive car or a new home? These are changes that can quickly raise your debt level, change your credit utilization ratio (how much of your available credit you owe), and affect your credit score.

The credit card company may see this new debt and quickly cancel your card. New debt on a credit card changes your credit utilization. But taking out a large loan may affect you as well. The credit card grantor may determine that you have too much outstanding debt to pay promptly.

Changes in Your Credit Score

Any time that your credit score changes or drops, you are at risk for having your credit card canceled by credit grantor. This is one of the most important reasons to keep regular tabs on your credit score. You can avoid having your card unexpectedly canceled. It’s also good to know in case of identity theft.

They Don’t Need a Reason

As mentioned before, credit card companies have the right to cancel your card, for no reason, at any time. Having a credit card is not actually your “right.” The credit card company gets to decide who they want to extend credit to. While this might be you, it could change at any time.

They are supposed to give you notice, but, might not always do so. Sadly, getting a credit card canceled, for any reason, looks pretty bad on your credit report. You definitely want to try and avoid having this happen if you can.

What You Can Do To Prevent Being Canceled By Credit Grantor

First, make sure that you at least occasionally use your credit card so that the account does not go completely dormant. Second, make sure that you keep an eye on how much you owe. Keep your credit utilization as low as you possibly can. Third, follow your credit report on a regular basis (at least once per year) to ensure everything is accurate.

Your credit is important and should be treated as such. You can prepare yourself for the unexpected by following all of the rules and staying on top of your debt carefully.

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Does Applying For A Credit Card Hurt Your Credit?

It can be tempting to apply for multiple credit cards in a short timeframe. You can use them to rack up the welcome offers for a lavish vacation. Or they can be used to receive some nice statement credits when making large purchases.

Having a few financial goals in mind, an analysis of your spending habits, and knowing the different types of credit cards can help you make the right decision.

While the short-term rewards can be the deciding factor when comparing two different credit cards, applying for too many credit cards at once can have consequences. Does applying for a credit card hurt your credit? While there is no rule that states a person must wait a specified amount of time before applying for the next credit card, there are some general guidelines to follow.

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Does Applying For A Credit Card Hurt Your Credit?

Let’s take a further look at how to avoid hurting your credit score and what you should do instead.

It’s All About The Credit Score

When applying for any type of loan or credit card (financial institutions consider it a form of revolving debt), they will look at your credit score. A credit score is a number that ranges from 350 to 850 (there are numerous variations in this scoring range). The higher the score, the more likely you are to repay your balance on time. There are several factors of short and long-term credit history that determine your credit score. Credit cards impact most, if not all, of those factors in one way or another.

Here is how your credit score is impacted by a credit card application. Ten percent of your credit score is comprised of “Hard Inquiries.” These occur anytime you give permission for a financial institution to run a credit check on you. It might be applying for a credit card, home loan, switching cell phone carriers, or applying for a new job.

Whether you get approved or denied, these inquiries cannot be erased from your report. If you haven’t checked your credit report in the last two years and you have had several life events occur, you might be surprised how many might have recorded on your report. Hard inquiries tell lenders if you have recently tried applying for similar financing and might have been denied.

Inquiries usually stay on your report for two years before dropping off. Normally, you do not want more than 5 inquiries on your report at any time, but three is an ideal number to aim for.

You can use one of the best Capital One credit cards for travel to build your credit so you can eventually upgrade to a premium travel card.

Other Considerations Regarding Credit Score

Two other factors are Types of Credit (10%) and Length of Credit History (15%). People with excellent credit scores normally have credit accounts that are at least 4 years old. A credit card issuer uses these two factors to find out how many credit cards and loans you currently have and how long you have had them for.

If you were recently approved for 2 or 3 new credit cards within the last 18 months, your length of credit history is going to be rather young. Even if you have never missed a payment and maintain a low debt-to-credit utilization ratio, your score will most likely be lower than when you applied for your first credit card.  You may still be approved for new credit cards, but the card issuer might authorize a smaller credit limit to offset the risk of having so many new types of credit.

Every time you apply for a new credit card or loan, your credit score will drop a few points. If you have a good or excellent score (720 or above) you can afford a few dings in your score and still qualify for the best rates. If your score is near 700 points or lower, each application will be a relatively harder hit.

Typically a score in the mid to upper 600s is still considered a “prime” score but these users are either recovering from credit history blemishes or have a minimal credit history. If you fall in this range, you should primarily concentrate on having one or two cards that allow you to gradually increase your credit score.

Does Applying For A Credit Card Hurt Your Credit?

How Often To Apply

Let’s talk about the temptation of credit card welcome offers. You might be contemplating churning credit cards for one of two reasons: balance transfers or travel rewards. There are more credit cards available than any one person can count on both their hands and feet. Just ask anybody who has done travel hacking for any period of time.

Once again, the guideline comes down to your credit score. The general rule of thumb for most people is to wait for six months between credit card applications. This allows you enough time to establish a credit history with your new card with on-time payments and the average monthly balance (debt-to-credit ratio).  The six-month period also provides an opportunity for your credit score to recover from the new inquiry.

When You Should Apply Depending On Your Credit Score

If you have an excellent credit score (800+), you will probably only have to wait three months before applying again.

As was mentioned earlier, these are “rule of thumb” guidelines. You will likely be able to apply for two credit cards simultaneously. You may get approved for both of them with a high credit score of 750 or above.

If you were recently approved for a credit card and are getting pre-approval offers in the mail for other cards, your score is high enough to receive another card. Should it be an offer that you like, apply for it. If not, wait the six months before applying for the credit card you do want.

There are certain times you will not want to apply for a new credit card. The most obvious time might be right before you are planning to buy a home and need to apply for a mortgage or during the application process. Lenders and underwriters do not like surprises and a new application may force them to rewrite some of the paperwork due to adjustments in your credit report.

The same can be said when applying for a car loan or any other type of loan for that matter. A new type of credit is perceived as an increased risk of default due to the lack of payment history. Lenders are looking to make secure investments with their money.

What If My Credit Card Application Is Denied?

Sometimes applying for several credit cards in a short time frame will cause an application to be declined.  What you shouldn’t do is apply for another credit card. It will count as another inquiry on your credit report for the next two years. Instead, call the card issuer that denied your application and find out the reason why your application was rejected.

You chose to apply for this particular credit card for a reason, so exhaust all options before moving on. If you have another credit card with the same issuer, you might be able to reduce your credit limit on your existing card to qualify for the new one. Sometimes it just takes a phone call to resolve an issue.

Another possible reason your application was denied could have been due to a low credit score. If that is the case, make sure you pay all your bills on-time. Pay them in full for several months and do not “max out” any account.

Ideally, keep your debt-to-credit utilization ratio below 20% for every credit card you own. To help determine when your score is high enough to apply for a new credit card, you can use a credit monitoring service that might provide you with a free credit score.

Does Applying For A Credit Card Hurt Your Credit: Final Thoughts

So, does applying for a credit card hurt your credit? It can. Knowing your credit score and being aware of your financial responsibilities can help. If you can manage your finances, you can bring up your credit score. Then you won’t have to worry about applying for a credit card.

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Are Balance Transfer Cards Better Than Rewards Credit Cards?

When people think about applying for a new credit card, they often look at the welcome offers and the types of rewards that can be earned with everyday purchases. Sometimes you might need another perk, besides rewards, to make you click the “Apply Now” button. This might apply to you if you are carrying a balance on one of your current credit cards and are looking for a hand-up to help pay off the debt.

But, is it better to choose a balance transfer card or a rewards credit card? Applying for either type of credit card will count as a hard inquiry and affect your credit score, so you will want to compare the advantages and disadvantages of each credit card to help you make the best decision.

Advantages Of Balance Transfer Cards

While rewards credit cards might offer welcome offers of frequent flyer miles or complimentary hotel stays when you meet a spending minimum, balance transfer credit cards will not charge interest on balances transferred from other credit cards for a predetermined time period (typically 12 to 18 months). Your new credit card might charge a one-time fee of 3% to 5% of the balance transferred (credit cards need to make money somehow). But it’s still cheaper than the interest you are paying on your existing credit card.

These cards can be very advantageous if you have any type of credit card debt as you can make payments interest free for several months. This can be a great alternative to debt repayment compared to a high-interest personal loan. You should view the 0% APR as a “second chance” to getting debt-free and rebuilding your credit.

Disadvantages of Balance Transfer Cards

While balance transfer credit cards offer an introductory 0% APR, there are several drawbacks to these cards. Possibly the largest drawback is the APR after the 0% introductory period ends. If you cannot pay off your balance in full (or most of it), the interest rates on these cards can be noticeably higher than other rewards credit cards with interest rates as high as 23%.

If your balance is too high, it might be better to swap your credit card debt for a personal loan with a lower interest rate. Of course, the post-introductory rate will largely depend on the credit card and your credit score. Not all credit cards or credit scores are created equally. It might pay dividends to look at the interest rates and perks of the card after the introductory period.

If you have a high credit score and a low balance, it might be more advantageous to apply for a new credit card with a short introductory balance transfer period and a low-interest rate.

Caps on Transfer Amounts

Another downside of balance transfer credit cards is that some credit cards cap transfers to a certain dollar amount. For example, the Chase Slate limits balance transfers at $15,000 regardless of your credit limit. Depending on the balance amount you want to be transferred, you will need to verify if the prospective credit card will allow you to transfer your full amount.

A final downside of balance transfer credit cards is the lack of purchase rewards. Cardholders of balance transfer credit cards normally have to trade rewards for 0% APRs on outstanding credit card balances. This isn’t always the case as some balance transfer cards do offer purchase rewards. However, they are usually not as lucrative as those offered by rewards credit cards.

Advantages of Rewards Credit Cards

Rewards credit cards “reward” users for spending and making payments on-time. They might award cardholders with points or cash rewards. Plus, their welcome offers entice new applicants to spend a specific amount of money within the first two or three months of account opening to receive an additional bonus.

In one way, rewards credit cards are the complete opposite of balance transfer cards that offer a “second chance” to pay off their balances without interest. With both types of cards, credit card issuers make their money through transaction fees and balance transfer fees (even when the transferred balance is paid in full before the introductory period ends).

As many balance transfer credit cards do not offer purchase rewards, rewards credit cards are better for those that pay their bills regularly. They might also be a better option for somebody who has a small outstanding balance and has more to gain from long-term purchase rewards, even if it means paying interest on credit card debt. Your amount of debt might determine if short or long-term rewards are better.

Disadvantages of Rewards Credit Cards

One big downside of rewards credit cards is the relatively higher fees that are incurred with balance transfers. Credit cards need to make a profit to remain in business. That means they can only offer so many perks.

This is why most credit cards charge no interest for the first 12 to 24 months of account opening or offer purchase rewards. If rewards cardholders do not meet the payment deadlines, they do not earn rewards points on the outstanding balance.

Rewards credit card programs might also require a higher credit score than balance transfer cards. Each balance transfer and rewards program has different eligibility requirements. Some are more stringent than others. As a whole, balance transfer cards give credit card users a chance to catch up and rebuild their credit.

People with higher credit scores will qualify for rewards credit cards that offer better rewards and have lower interest rates than post-introductory APRs offered by balance transfer credit cards. If you have a history of credit card debt or low credit score, your application for a rewards credit card might not be a sure thing. The best place to get credit score information won’t hurt your credit but will also provide essential information.

Are There Credit Cards With Rewards and Introductory APRs?

Yes! There are a few credit cards that offer 0% APR on balance transfers for at least one year and rewards for everyday purchases. You may need a higher credit score to qualify for these cards, but they do exist. Our study of the best balance transfer credit cards to apply for in 2018 can be found here.

The Verdict on Balance Transfer Cards

Which type of credit card is better? It depends on your financial circumstances. If you have a manageable credit card debt of several thousand dollars that you can pay off within the 0% introductory period, a balance transfer card will be a better option. The interest-free payments will probably be a better “return on investment” than any rewards program.

Once you become debt-free, and if your credit score is high enough, you can always apply for a rewards credit card.

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Best Balance Transfer Credit Cards To Apply For in 2019

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What is a Balance Transfer Credit Card?

A balance transfer credit card is a great option for those of us looking to consolidate debt in 2019 and move closer to financial freedom. Balance transfer credit cards simply allow you to transfer your debt from a high-interest credit card to one with a lower interest rate, sometimes 0% for up to a year.

When is a Balance Transfer the Right Option?

Balance transfers are a good idea for someone that has a reasonable amount of credit card debt on a high-interest credit card. The majority of reputable balance transfer credit cards require that the applicant have good to excellent credit (around 690 – 850). This isn’t a great debt consolidation option for someone hoping to repair their credit.

How Does a Balance Transfer Work?

Your existing credit card issuer will first need to approve all or part of the balance transfer request. It can take up to 3 – 5 weeks for a balance transfer to take effect, so you will need to continue making payments on your old account until the transfer has been completed.

There are some fees and limitations that apply to balance transfer credit cards. These include:

  • Balance Transfer Fees: Balance transfer fees are typically 3% to 5% of the transfer amount.
  • Interest Rates: Most balance transfer credit cards offer a 0% APR introductory rate; however, interest rates apply after this introductory period, just as they would for any other credit card.
  • Annual Fees: Ideally, a balance transfer card won’t include annual fees; however, a few do. It is important to be aware of this when looking for cards.

The criteria above are highlighted for each of the cards we’ve identified in this post.

The Top Balance Transfer Credit Cards for 2019

BankAmeriCard Credit Card

Balance Transfer Fee: 3% of the amount transferred, with a minimum of $10.

Introductory APR: 0% on purchases for 15 months.

Regular APR: 12.99% to 22.99% variable

Annual Fee: $0

Recommended Credit Score: 690 – 850

Rewards: Access to FICO score for free once per month.

Pros: No annual fee and a great introductory offer – $0 balance transfer fee on transfers made within the first 60 days of opening an account. If you are able to pay down your debt quickly, you may not incur any interest or pay any fees.

Cons: Comparatively high balance transfer fee after the introductory period, and a comparatively shorter introductory APR period. There are also no additional rewards associated with this card.

Chase Slate Credit Card

Balance Transfer Fee: 5% of the amount transferred, with a minimum of $5.

Introductory APR: 0% on purchases for 15 months.

Regular APR: 15.99% to 24.74% variable

Annual Fee: $0

Recommended Credit Score: 630 – 719

Rewards: No rewards, but cardholders can check their FICO score once a month for free.

Pros: No annual fee and a great introductory offer – $0 balance transfer fee on transfers made within the first 60 days of opening an account. This card is also available to those with average credit, compared to the rest of the cards on this list, which require excellent credit.

Cons: No rewards, and account holders can’t transfer balances from other Chase credit cards or non-credit-card debt. Transfers can’t exceed $15,000 in total, so this card isn’t a good option for someone with relatively high credit card debt. It also has a comparatively short introductory APR period.

Citi Simplicity Card

Balance Transfer Fee: 3% of the amount transferred, with a minimum of $5.

Introductory APR: 0% on purchases for 21 months.

Regular APR: 14.99% to 24.99% variable

Annual Fee: $0

Recommended Credit Score: 690 – 850

Rewards: None.

Pros: No annual fees, no late fees, and an extremely long introductory APR offer. This card is ideal for someone that needs a little longer to pay down their debt. Citi also allows you to transfer any type of debt to your card, including non-credit-card debt such as student loans and auto loans.

Cons: No rewards, and account holders can’t transfer balances from other Citi credit cards.

Citi Diamond Preferred Card

Balance Transfer Fee: 3% of the amount transferred, with a minimum of $5.

Introductory APR: 0% on purchases for 21 months.

Regular APR: 13.99% to 23.99% variable

Annual Fee: $0

Recommended Credit Score: 690 – 850

Rewards: None.

Pros: No annual fee, and a comparatively long 21-month introductory period. This is an excellent card for someone that needs longer to pay back their debt.

Cons: No rewards, and account holders can’t transfer balances from other Citi credit cards.

Discover it Card

Balance Transfer Fee: 0% on balance transfers for 18 months.

Introductory APR: 0% on purchases for 6 months.

Regular APR: 11.99% to 23.99% variable

Annual Fee: $0

Recommended Credit Score: 690 – 850

Rewards: Earn 5% cash back at gas stations, grocery stores, Amazon.com, or wholesale clubs each quarter. Cash back can be redeemed at any time, it never expires.

Pros: This is the only balance transfer card on this list that offers robust cash back rewards, so it is worth holding onto long after your debt has been paid off. If you have good to excellent credit and are able to pay down your debt quickly, this card is an excellent option. There are also new-cardholder bonuses that grow the more often you use your card for everyday purchases.

The 18 month 0% balance transfer fee period isn’t as long as the two 21-month options offered through Citi, but it still stacks up nicely against introductory offers from other balance transfer credit cards.

Cons: Comparatively short introductory period. Unless you can pay your debt off within six months, you will likely incur interest charges with this card.

Top Recommendations of Balance Transfer Credit Cards

Best Long-Term Value

The Discover it MasterCard is by far the best long-term value. It is the only card that offers rewards on everyday purchases, and its 18-month 0% transfer charge is a strong introductory offer.

Best Introductory Offer and Flexible Repayment Options

For those that may need longer to pay off their debt that also has the bulk of their debt in student loans or an auto loan, the Citi Simplicity card is the best option.

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How to Manage Multiple Credit Cards

For those entering into the credit card arena for the first time, how do you decide which card is right and best to use? There are just so many cards out there, each offering their own sets of rewards and incentives and bonuses, so from all of these options, how on earth do we pick just one card ? Well there’s great news for you, and that news is that you don’t have to stick with just one single credit card ever.

You can have as many cards as your credit will approve you for, but although you can have more cards to your name than you thought you ever could, this doesn’t by any means translate that you should apply and hold onto every card application that you see. Responsibly managing even a single card is hard work as it is, and with every card you add to your repertoire the job only gets harder and more complicated. Below is a breakdown of how you can manage multiple credit cards all at once, and do so responsibly.

 

Control the cards.

The biggest note to remember is that you need to remain in control of the cards and the “opportunity” that they represent. Yes, a credit card does mean that you spend credit rather than your own money when you purchase things, but like we remind you of quite a bit, credit is not your money but somebody else’s, and they are not looking to do you any favors by having you borrow their money.

When you do use your multiple cards, keep track of what you use them on, and the more cards you have and use, the more methodical you should be when pulling out the plastic. Don’t carelessly use cards based off which one you think haven’t used in a while or which one is your simply your favorite, but rather use them as they help you best.

This method of using cards that serve you best can be quantified by what kinds of purchases offer you the most rewards for specific purchases. Or, if the rewards are for the most part even all across the board for your general purchases, then use one card for every different area of spending: use one card just for fill ups at the gas station, one card just for groceries and necessity purchases of the like, and another card for recreational actives like movie tickets and things of that nature.

Keep the purchases you make on the cards organized, and this will help you keep mental track of how the cards are being used and how much you have spent on them recently that much easier come time to settle up on the monthly bill.

 

Know yourself.

Before you begin to sign up for multiple cards, you should first assess yourself and determine what kind of a spender you are. When you look in the mirror, do you honestly see the face of a responsible spender looking back at you? Even if you have answered yes to this question, you still should reconsider having multiple credit cards.

NOTE: When we say say multiple credit cards, we don’t mean two or three, but rather four or seven or anything more than that. Multiple cards. Second, having multiple cards does not mean that having more cards is a bad idea, because in fact, having multiple cards can be, when used responsibly, a huge help to attain purchases that otherwise would be impossible without upstanding available credit.

So before you consider adding more credit cards to your already existing line up, review how your spending has looked in the past with your credit cards. Is your credit history riddled with late and overdue payments, and even credit limits being reached? These factors are some pretty bright signals that should be considered in the conversation about whether or not you should invite more credit cards into your wallet. Know what kind of spender you are.

 

Know how credit cards work.

Remember how credit cards work: lenders let you use their money in exchange for the possibility of paying interest on late payments and over-drafting of allowed credit limits. So unless you want to pay up on fees that you very easily could avoid, keep your credit limit in mind when the cards have to come out, and keep your payments flowing on time, every time.

Banks and lenders only make money off of you when you let them, so stay on top of every single card that you have active that your payments are regular and frequent.

 

Does each card have a real reason to be there?

We all think we need more, and it doesn’t really matter what it is for, we just feel we need more. Yes, you can apply for as many cards as you want (keeping in mind your credit score is effected every time), but do you really need multiple cards? More cards can be useful for various situations, but to have multiple and active cards all at once just to have more can lead to more of a curse than a blessing.

So consider and reconsider if you truly need more cards than what is absolutely essential.

 

Do the pros outweigh the cons?

Before you open up another credit card, think about having this card forever and never being able to close it. Not that you cannot close out a credit card, thinking about having this card for the long term will help you determine if this card is truly worth signing onto.

Along those lines, you also should consider that some cards have annual fees, so be sure that the benefits and rewards outweigh the fees. Make sure you really are making a wise choice before you sign onto another credit card, and not just signing on to chase more rewards.

 

To summarize, consider and reconsider the amount of cards you own and be diligent with everything that you swipe on. Keep careful track of everything you place onto a card and try to keep your purchase history organized to specific cards, as this will help you remember what purchase was made on which card. While you swipe, keep in mind what your credit score looks like before and after you sign onto more cards. If not kept track of, your credit score could get ripped to shreds with an abundance of credit cards running unattended to.

As always, remember that credit is not your money, but money that is being lent to you with the condition that anything you spend outside of their restrictions result in you handing them over some of your own money. So regardless of how many cards you have, whether it’s one or 12, keep your payments on time and in full. If you can honestly and responsibly keep track of every single card you have in your wallet and keep them paid up and organized, then there is no reason you should run into any problems, regardless of how many cards you have. Stay alert out there, credit users.

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Tips to Raise Your FICO Credit Score

Your FICO credit score is one of the major factors a lender will consider when determining whether or not to approve you for credit. There are many things that go into your FICO score, which means that there are things that you can do to improve it. Careful attention to your FICO score can help you build your credit.

Here are tips that can help build and raise your FICO score

Apply for credit cards

You may be wondering if applying for credit cards can hurt your credit, but, just the opposite is true when you use them responsibly. The same goes for installment loans. Those with no credit will be a higher credit risk than someone who has demonstrated responsibility by making payments regularly and on time.

Make every payment on time

When you make your payments late, this shows up on your credit report. Lenders do not like to see you making a habit of late payments. As your FICO score is computed, 35% of the score is dependent upon you making timely payments for credit cards and loans. Never missing a payment is the best way to get the most from this factor. The longer the history that you have of making payments on time, the better this part of your score will be.

Pay off balances in full each month

While this is difficult for some, especially those who have accumulated large amounts of debt, making the largest payments you can afford is smart. This will help you lower the balances. Once you get your credit cards paid off, try to pay the entire amount that you owe each month. Never make less than the minimum payment required. The lower your overall balance, or credit utilization, the better your FICO score will be.

Communicate with creditors if there are problems

If you fall on hard times financially, contact your creditors before you begin to miss payments. Often they can work out a temporary solution, or negotiate a payment plan with you before your credit is adversely affected. When you are making regular payments, even when you are struggling financially, you can often keep your credit score from dropping too far.

Don’t rush to close credit cards to raise your FICO score

Closing credit card accounts can actually have a negative impact on your FICO score, especially if you have had the credit card for a long time. If you close credit cards that are paid in full, yet you still have others open that you carry a balance on, then you are going to see your credit score drop because your credit utilization will increase. This means that you will be using a higher percentage of your available credit. You are going to be better off keeping cards open when they have a zero balance, particularly if you have a long history with that creditor.

Keep track of your credit utilization

If you have a high credit utilization or a high debt-to-credit ratio, contact your creditors to see if you can have your credit limit raised. This can help improve your ratio and also your FICO score.

Don’t open too many accounts too close together

This is especially important for new credit users. When you are just starting out, one or two cards is plenty. Even if you have well-established credit, opening too many credit cards in too short a time period will have a negative impact on your FICO score.

Make sure your creditors know how to reach you

Always notify your credit card companies if you have an address change. If you miss a bill because they moved, it will not be their fault. You will likely see a change in your FICO score as a result. This is a common mistake, and one that is completely avoidable.

Immediately report if your card is lost or stolen

Reporting a lost or stolen card as soon as you are aware of it is crucial. Most credit card companies will not hold you liable for unauthorized purchases under these circumstances. If you do not promptly report it, you could be held responsible for large purchases. This will also affect your FICO score.

Check your credit report regularly

You should check your credit report at least once a year. Make sure that there are no inaccuracies. Most free credit reports will get information from the three major credit bureaus—TransUnion, Equifax, and Experian. Checking your credit report will not hurt your credit score. It will help you keep tabs on any accounts that you are responsible for. If you notice any inaccuracies, contact those creditors immediately to have the issue resolved.

Your FICO score is important. You should know what it is and make efforts to keep it solid or improve it. Use these tips to keep your credit great!

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The Best Secured Credit Cards

The Best Secured Credit Cards

Credit cards provide a method of funding for some of life’s unexpected or major expenses, but these revolving credit accounts are not readily available to certain individuals. If you are just starting out in your financial life and have not yet established a credit history or profile, securing a new credit card can be a challenge. The same goes for anyone with previous credit issues, such as late payments, accounts in collection status or high balances on revolving credit accounts. Fortunately, credit can be established or repaired through the use of a secured credit card.

Credit providers offer some individuals the opportunity to open an account without previous credit history or with a less-than-perfect credit through a secured credit card. This type of credit card is made available with a lower credit limit than conventional credit cards and is secured by collateral, such as a savings or checking account. Secured credit card providers extend a revolving credit limit based on the amount of the pledged savings or checking account balance to help offset the risk of taking on a borrower who otherwise may not be able to qualify for a credit card. Over time, secured credit cards evolve into traditional credit accounts, sans the need for pledged collateral, but only if and when the provider is certain the borrower has established a solid history of on-time repayment.

Here are the best secured credit cards available to individuals with no credit history or a lackluster credit past.

Discover it Secured Credit Card

Discover is a sound starting point for individuals seeking a secured credit card to shore up past credit mistakes or establish a new credit identity. The provider offers a secured credit card through its Discover it brand, available with no annual fee and no late fee assessed on the first late payment. A minimum deposit $200 is required for all applicants, and total credit line is determined based on a review of credit history, income and other outstanding debts. Discover reviews each account after month 12 to determine if the initial deposit can be returned, based on the individual’s borrowing and repayment habits.

One of the reasons Discover it Secured credit card tops the list is that it offers borrowers the opportunity to earn rewards on purchases – a unicorn in the secured credit card world. Up to 2% cash back can be earned for restaurants and gas station purchases, up to a cap of $1,000 in spending each quarter. All other purchases receive 1% cash back. For new card members, Discover will match any cash back earned for the first year automatically. It is important to note that the annual percentage rate on Discover it Secured credit card may be substantially higher for new borrowers compared to other secured or unsecured cards.

Capital One Secured MasterCard

For individuals looking for a low deposit secured card, the Capital One Secured MasterCard is a great choice. Depending on credit history, Capital One offers a credit line of up to $200 with a deposit as low as $49. No annual fee is assessed for cardholders, and a credit line increase may be applied for without an additional deposit within the first six months of account opening. The APR offered to new card members is a variable rate, starting at 24.99%.

The Capital One Secured MasterCard is a no-frills option for individuals needing a card with a lower deposit, but there are some drawbacks. Capital One imposes more stringent qualification requirements on borrowers, despite its secured nature, meaning a recent bankruptcy or no checking or savings account will disqualify an individual. Additionally, the secured credit card does not offer perks in terms of rewards or cash back. For these reasons, this card is best suited for individuals looking to establish credit history in a cost effective way, as opposed to those looking to repair severe credit damage.

OpenSky Secured Visa Credit Card

Individuals looking for a secured credit card for credit history repair may find solace in the OpenSky Secured Visa Credit Card. Underwritten by Capital One Bank, the OpenSky secured card offers a credit line of up to $3,000, equal to the deposit made at the time the account is opened. Borrowers have the opportunity to ask for a credit line increase after the account has been established for some time, but an additional deposit may be required to offset some of the lender’s risk. The annual percentage rate for new cardholders is relatively low compared to other secured card providers, starting at a variable 17.64%.

The OpenSky Secured Visa credit card does come with an annual fee of $35, and it does not offer any rewards program or cash back for purchases. However, the secured card does not require an initial credit check nor is a checking account necessary. Individuals in need of credit repair without concern for the amount of deposit to secure the credit card are a good fit for the OpenSky Secured Visa credit card.

U.S. Bank Secured Visa

The U.S. Bank Secured Visa is a solution for both newbies to the credit scene as well as though with less-than-stellar credit history. A deposit of no less than $300 is required to establish the account, but borrowers may pledge up to $5,000 for collateral. The credit line offered is equal to the total deposit on hand, and an annual fee of $29 is assessed for all cardholders. The annual percentage rate charged on purchases is less aggressive than some card offers, starting at 18.99%.

Borrowers who utilize the U.S. Bank Secured Visa do not have the ability to earn rewards or cash back, but a review of the account can be done as soon as 12 months after account opening to determine whether an unsecured card is available. The amount used for the deposit is held in an interest-bearing savings account which is beneficial when the deposit is returned. For a simple, lower interest rate card, the U.S. Bank Secured Visa is a smart choice.

USAA Secured American Express or Visa Card

For active or veteran military members and their families, the USAA Secured American Express or Visa Card is a great solution to repairing poor credit or establishing a credit history. The secured card offerings through USAA require a deposit of no less than $250 but can be as high as $5,000, and the credit limit is equal to the amount set aside. What makes the USAA secured cards different from most other providers is the fact that the collateral is deposited into a two-year certificate of deposit (CD) that earns more interest than a traditional savings or checking account. As the interest is credited to the CD, borrowers have the opportunity to request a credit line increase.

The USAA secured credit cards assess an annual fee of $35, but the interest rate on purchases can start as low as 10.15%. There are no rewards associated with either the Visa or American Express secured cards through USAA, so this option is best fit for military members looking for an account that provides additional interest on deposits and a potentially lower interest rate on purchases.

While secured credit cards provide an opportunity for individuals to establish a credit profile or repair past credit mishaps, not all cards are created equal. Prior to applying for a secured credit card, it is important to fully understand the annual percentage rate charged on purchases, any annual fees imposed, and the rewards or lack thereof available.

See all the best credit cards here. 

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Which Debts Should I Pay Off on my Credit Cards First?

Which Debts Should I Pay Off on my Credit Cards First?

Chances are that you have credit card debt. We all do or at least have had it at some point, and the question we had or have to face is “how on earth are we going to tackle this pile of payments?!”

Hopefully you were able to catch yourself from making your balance any bigger than it needed to be and were able to minimize the damage, but many cases are not that clean cut and easily stoppable. Some credit users are lucky enough to have a single credit debt owed to a single lender, but many others have multiple debts owed to several different credit card lenders, and the question that they now face is “Where do I start?!”

Below is list of possible starting points that you can use to begin your journey out of debt and on your way to turning around your credit score.

 

Understanding credit lenders

Before we start handing out suggestions on how you can best un-bury yourself from your credit card debt, it’s good to know why exactly you are getting into such debt in the first place: the lenders.

Credit card companies get their money from you as the card holder from interest and annual fees. The annual fees, although they may look huge as they leave your wallet once every year, is only a slice of the gigantic pie. The real money lies in the interest payments that you pay every time you have another month go by that you do not pay back your credit card expenses in full or to their specified monthly minimums. This focus on interest rates and compounding debt amounts is what lenders are banking on you to provide to them as long as you keep your account with them. Its pure profit for them.

Interest rates are not something that you need to be inherently afraid of. For those who can be responsible with their cards, they won’t need to bother worrying about interest rates and compounding amounts as they go about their interactions with credit lenders. If you keep on top of your payments and continue to pay them on time and in full, then you will have no debt.

Sounds pretty easy, but as you know by now, staying on top of the ball for every expense that goes through you is no easy feat. Emergencies pop up that you cannot cover in their entirety and rather than taking out a loan from an outside source, you just swipe the plastic. This happens a few times and before you know it, you are $16,678 deep in credit card debt. Life happens and payments are due, but to quickly dig yourself out of any pits you may have fallen into, you should know the best methods.

 

It’s all about the interest rates, baby

Let’s say that you have multiple credit cards that you have debt on. One card, “A” has a large amount of debt, but a very low interest rate, another, “B” has a small amount but a very high interest rate, and the last, “C” has a moderate sized debt with a moderate interest rate. Instinct may tell you that you need to take out the largest sized debt, “A” first, because it looks like it is the biggest. Right?

The interest rate is what is killing you and keeping you in debt. The best practice to start taking out that debt is to knock out the debt with the highest interest rate first, regardless of the current amount. Taking out these debts shortens the length of time that you are trying to pay off your total amount because your biggest amount with a very low interest rate (“A”) is not going to grow nearly as fast as debt “B”. “B” will grow like crazy and go from a small amount into one that is even bigger than “A” in less time than you think.

Going by interest rates rather than lump sums, rank your credit card debts in order of highest to lowest and use that order for which debts will be taken out first. Stick to this order and you will dig yourself out of debt much faster than you may have planned. So using the examples from above, pay them off in order of “B” then “C” and then “A”.

 

Don’t be afraid to move debts around

If all of your cards but one have an astronomical interest or compounding rate, consider moving over all of your debts onto a single card, or set of cards with a single low interest rate.  Move as much of your debt as your credit limit will allow. By doing so, you can eliminate the ability for your debt to continue growing out of your control.

Now before you dive for that phone to call up your lender to make a transfer, keep in mind that there is usually a debt transfer fee that is pretty up-there in cost, and it may wind up biting you back due to its own price tag. If the cost to move over your debt is worth the cost it is to make the transfer, make it happen, but evaluate if the cost is worth it first. This is not a one size fits all suggestion.

 

Equal installments as compared pinpoint payments

Whenever you come across some surplus income and want to throw it at your credit card debt, a temptation may be to break it into even chunks and disperse it evenly across all of your debts. Remembering what we mentioned earlier about the weight of interest rates, focus the amount on a single debt rather than all of them. Spreading a single amount across differing debts of varying amounts and interest rates will just absorb your payment and end up not making a bit of difference in the overall debt.

Pinpoint the debt with the highest interest rate and throw what you can at that one debt until it is all gone, and then move to the next one. Keep doing this until they are all payed up.

 

 

Although you may want to attack the largest amounts of debt first, this is a practice that is best avoided as a first impulse. There is nothing inherently wrong with attempting to knock out the biggest amount first, because by being disciplined enough to tackle a pretty huge sum in its entirety, it can be a pretty huge confidence boost. To see a debt drop from over $16,000 to zero can be the mental boost needed to reaffirm your actions and keep you focused to keep pushing onward to paying off all of those debts. Use what methods are best for you that you can honestly stick to.

There is no cheat sheet or concrete answer key to paying off debt because everyone’s situation is different. There is no blanket answer because like a snowflake, no two credit situations are the same (pardon the elegant analogy). Hopefully the above tips and practices will help you discover how you can best chip away any debt of your own that you may be struggling with.

Have any tips that weren’t covered above that can help others? Comment and share below!

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How Many Credit Cards is Too Many?

 

When it comes to your credit score, bigger, and more, is better. With the exception of how much debt you have (obviously you want that as small as possible if not gone completely), you always want bigger with your credit line. If you have more credit cards, then your credit limit rises, which means you can have that much more available credit to your name. Although more credit cards is a good thing, not being able to manage them wisely can end up being pretty devastating to your score. With all these pros and cons, how can you decide what the magic number of open and running credit cards is right for you and your situation?

Below are some factors to consider in deciding just how many active credit cards is right for you to have in your wallet at once.

 

Why would I want more available credit?

Credit lenders check to see that you are wise with the amount of credit you already have available and at your disposal, and you want them to see you as responsible as possible. A single credit card, for example, may give you $1000 in available credit, and if you are wise in your credit usage, you keep your usage to below 50%. That means that you only have about $500 dollars of for-the-most-part guilt free usable credit that won’t be too heavily scrutinized by credit lenders.

Now $500 dollars is not so bad in terms of guilt free credit for when you are first starting out, but as time goes by, the expenses that need to be immediately covered get taller and taller, and you may want to stretch out and use the other $500 dollars of available credit that you otherwise leave ignored and unused. Although it may seem that you are just using what it rightfully yours, if you spent $999 of an available $1000 credit limit, guess what that tells your lenders? “I like to spend as much money that isn’t mine as possible!”

Jokes aside, you don’t want to look like you abuse your credit. To avoid going over that sweet spot of 30% to no more than 50% of your credit, expand how much available credit you can use. You can do this by either appealing for a larger credit limit on you already existing credit card, or you can apply for more credit cards. For example, your already standing $1000 limit gets raised to $1500, and you add two more credit cards each offering a $500 limit, and you have $700 in expenses due. Your debt to credit ratio went from 70% of a $1000 limit, to 28% of $2500. By expanding how much credit is available to you, you dropped your ratio all the way from being in the danger zone (70%) safely into the green sweet spot (28%). Lots of numbers flying at you, we know. Just bear with us.

Your available credit works as a pool that you can constantly add to and grow, and if can realistically keep track of every available card that you add you your pool and keep accounts in balance and in check, then more cards can be a great help to you. However, the more cards you add, the more difficulty it becomes in keeping everything straight.

 

 

No one card is accepted everywhere

Keeping one single card is much easier to manage than five or six, to be sure. One single bill, one single payment, and one set of rewards to monitor and keep track of. The disadvantage of having a single card is that your limit can only get so high, and your credit service may not be accepted everywhere. Visa, MasterCard, Amex, and Discover are some of the major services, and as we’re sure you can recall from time spent out and about shopping for goods, not every location accepts the same cards.

Sadly there is no universal currency out there that is accepted by all vendors with absolutely no fees (other than cold hard cash, but who uses coins and paper anymore??), but when you are out to dinner and are rocking a cashless wallet with only an Amex, and they only accept Visa, what are you going to do? We’ve all had this nightmare at one point in time, and the only way to avoid this scenario, besides asking right up front what cards they accept every time you go outside, is to get the most common credit card services.

 

Don’t open cards just for the rewards

A misconception that may be reached here is that you can just keep opening accounts and rack up a whopping pool of available credit that you can dip into at any time the mood strikes you. If this sounds like a great way to live to you, know that every time you open an account, a lender checks your credit, which dings your score. To that end, if your account goes unused for too long, or is deemed to be too risky to keep open by the lender, your account will be closed which also dings your score. So before you think about applying for 40 or so new credit cards so that you can soak up all the rewards, think about your already fragile and delicate credit score and the stress that it will endure as you go about opening new accounts and closing old ones.

 

So how do I know how many cards I should have?

The bottom line is that there really isn’t a set number of cards that blankets everybody’s financial and credit situations. Some individuals can keep track of an endless list of pending payments and billings, and others can’t even keep track of the one credit card they already do own, and even though it is set to “Automatic Bill Pay” online, it still causes them stress. It depends on how well you can keep track of your expenses and bills.

Opening and having access to more credit cards, such as two or three, or even as high as six or seven can have its perks, but if you cannot handle the mental strain that ensues to keep track and balance all of your accounts and not miss or be late for a single payment, then keeping your card count down may be best for you. Same goes for having less cards. One single bill and one set of rewards to keep track of can be freeing and stress-less, but it does limit where you can use your card and what kind of rewards you can have at your disposal.

 

How many can you manage best?

These factors in mind, consider if you can handle having two to three credit cards. Having different cards opens the door to varying rewards, raises your usable credit limit and also protects you from the embarrassing but at some point inevitable “I’m sorry ma’am, but we don’t accept that kind of card here”. Only acquire what you can realistically handle, but if you do decide to get more cards, learning how to balance your accounts and remain on top of the ball is a useful skill to obtain.

 

So as of right now, how many cards and accounts do you think you can honestly manage and manage well?