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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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Can a Credit Card Improve My Poor Credit Score?

We’ve all been there when it comes to credit cards: your credit limit is expanded by even the smallest margin, and we suddenly assume that we can buy absolutely everything and anything with little to no consequences attached. A few late payments go by that you don’t cover and before you know it, you are in some pretty deep debt, and your lack of funds to dig yourself out of the nice little hole you have dug yourself has left your credit score in tatters.

 

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Fear not, for the path out of a ruined credit score is a lot smoother than you might think. Below is a breakdown of how you can use the very same credit card that ruined your credit score to climb your way back up the credit score ladder.

Credit cards are loans

Before we can tell you how to fix the problem, it’s good to know what your problem is. Your credit score is where you place on a meter in which institutions can see just how responsible you are with money as a loan, as represented on a numerical scale. The scale displays a three-digit number that places you on a range to gauge how creditworthy you are as seen from “Poor” to “Excellent”.

The scale gets its points system from how reliable you are in paying debts in a timely manner and in full amounts. How can you get and keep a good score? Pay your bills in full and on time. How can you wreck your credit score? Stop paying your bills in full and on time. It sounds silly, but life just isn’t as easy as it sounds to pay bills fully and on time. Things come up unexpectedly and sure enough, you have missed a single payment and your credit score has slipped from “Excellent” to “Fair”. It doesn’t take much.

Find out what your score is

To fix your score, you need to gauge the damage to understand just how hard you need to work to fix it. Checking your score too often however can actually end up being harmful to your score if checked too often, so look up the exact number with caution. Although this news may be troubling, there are still ways you can check how you are holding up in the credit score department that do not harm your score in any way.

There are three institutions that monitor your credit score, and each of these institutions release one free copy of your credit score per year: Equifax, TransUnion, and Experian, all of which run off AnnualCreditReport.com. So for those keeping track, that equals up to three different times that you can check your score per year with no penalty to your score. (They have differing scales on how they display your scores, but the information they use is for the most part universal).

Plan on taking advantage of these opportunities because knowing an exact number can be the difference between sleepless nights from all the stress of what it could be, and a good night’s sleep from knowing that your score is safe and in the green.

If you can pay it off, make it happen

When it comes to credit card debt, you need to get that paid off as soon as you can. If you are in a position to wipe it out in one clean sweep, then by all means make that happen. If you cannot knock out the entire debt, then make it a priority to wipe it out in payable increments as soon as possible. Having your debt accumulate acts as a cancer to your score and as time goes by, your score dips lower and lower. Pay off your credit card debt(s) in whole as soon as you can and by doing so, you can actually get started in turning your score around and head back uphill.

Spend not a penny more than half of your credit limit

If you use your credit card often, keep the amount you place onto the card under half of what your credit limit is, and if at all possible keep it under 30%. This may look pretty nit-picky, but by showing restraint with how much you place onto the credit card, you are telling the banks that you are responsible enough to show discipline in how much you do spend as compared to how much you can spend. Show them that you are responsible in using your credit and keep to using only 30%.

NOTE: For those with very small credit limits on any particular credit cards, you can call and see if you qualify to have your limit raised, therefore making your usable 30% bigger.

Make payments before the bill shows up

Don’t wait for the bank to tell you that “You can now pay off your credit card bill” at the end of every month. Beat them to the punch and make your payments throughout the month instead of one lump payment at the end. The more you show that you are reliable in making payments in regularity and in full, the more your score will go up.

Treat it like a debit card

When it comes to how you should think of your credit card, think of it as a debit card, but attached to an account that isn’t yours.

If you don’t have the money to pay for what you are buying with the credit card, then maybe you shouldn’t be making this purchase to begin with. Buy what you can afford, or at the very least pay off as close to immediately as possible. This train of thought will prevent you from making frivolous purchases and keep your budget more accurate to what it truly is instead of what your credit card makes it look like it is. A tighter leash on how often you whip out the card will avoid interest rates making the purchase even more expensive, and avoid even more decreases in your already bleeding credit score.

Keep accounts open

Don’t be so quick to close down a credit card account. When lenders and other score checkers look to see your number, having open and running accounts keep your score up, and also leaves the door open to opportunities to tidy up your score yourself by applying the methods discussed above. Only close down credit card accounts as an absolute last resort.

Don’t be afraid to negotiate

Before you throw in the towel and start pondering how bad declaring bankruptcy actually would be to go through, you still have one last tool in the box: negotiation. Call up your credit card service and considering if you have kept a close record of your credit card uses, go through and ask them if they would be willing to remove a few payments, or all of them altogether (this sounds ridiculous, but all it takes is a phone call with a nice person on the other end of the line).

State your case and if they are willing to listen, they may be willing to forgive at least one of your late payments, which would in turn boost your credit score up a few notches. Ask and you will receive.

Keeping your credit score in a solid place doesn’t have to be the hardest thing you have ever done, it just requires you to really pay attention as to how often you are pulling out the credit card when you could just as easily pull out cash or your debit.

That’s really the secret of how to get a good credit score: Only take out the plastic if you have a realistic plan to make the payment in the future fully and as soon as possible. Don’t let all the perks of credit cards lure you into a false sense of financial security. Think realistically, and swipe responsibly.

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Apple Introduces Mobile Payments with Apple Pay

As if Apple needed any more of the market share, it is once again moving forward quickly with its mobile apps and new features. Apple Pay is scheduled to be unveiled in October 2014, and offers more flexibility and more options when it comes to accepting mobile payments.

Soon, adding your credit card that you use for payments will be possible for those who are using the iPhone 6 or iPhone 6S, or the new Apple Watch. When you shop at stores that have checkout terminals that are capable of using Near Field Communication (NFC) technology, all you have to do in order to make your purchase is hold your phone close to the terminal and use your fingerprint to complete the purchase. Sound crazy? Maybe. But, let’s dig in a little bit and discuss the details.

Apple Pay

NFC Technology

The Near Field Communciation (NFC) technology is also often referred to as “tap to pay” technology. Any device that contains an NFC chip, which now includes certain types of smart phones, credit cards, hotel keys and other electronic cards, is able to make wireless payments when the merchant has this technology available. You can have multiple cards set up to use with your Apple phone or device, and select the one you want to use for the purchase at that time. The iPhone 6 is the first version of the iPhone that is equipped with this technology, but, previous versions of Android phones or certain devices using Windows operating systems have had this capability.

Easily Add Cards 

The first cards that get added to your Apple Pay are any cards that are already associated with your iTunes account. Previous options for mobile pay, such as Google Wallet, stored encrypted card information differently, in a cloud, and some would argue that this was less secure than storing it in the SIM card and requiring fingerprint confirmation for payment. To add cards to your Apple Pay, all you have to do is photograph the actual card and add them to your Passbook.

Use Most Types of Credit Cards 

With the Apple Pay, you can opt to use a variety of credit cards, including Visa, MasterCard and American Express. Multiple banks are included in this group, including Wells Fargo, Chase, Barclays, USAA, Citibank, Capital One and Bank of America.

Opportunities to Use Apple Pay

More and more merchants are enlisting the technology necessary to use Apple Pay at their purchase terminals. Look for the symbol that shows the terminal is equipped to handle the transaction.

Compatibility with Other Mobile Apps

Apple Pay has integrated with several other popular mobile apps, including Open Table and Uber, allowing users to use their smart phones to pay for dinner or order a ride when they need one. The Touch ID security feature is convenient, yet allows for increased flexibility of payment options (as opposed to cash and credit cards), which is only expected to increase as more partner apps become compatible.

Focus on Security

The main layer of security, and one that makes the Apple Pay so unique is the use of Touch ID. Your phone will be able to identify that it is indeed you making the purchase, since you have to use your fingerprint to actually complete the transaction. Because the card number is not actually stored within the phone, this method of payment is very secure. This means, that even if your phone is lost or stolen, your digits are safe.

Also, the way in which the data is stored, with a dynamic security code that is transaction-specific (like many ENV-encrypted credit cards), prevents hackers from being able to retrieve data from any security breach.

Is the End of Credit Cards Nearing?

Don’t worry, those handy plastic cards aren’t going anywhere any time soon. Mobile phones have had the capability to make payments for several years now, and people still use credit cards. For now, and for a while into the future, this technology will not only not be available everywhere, it will take a long time for this type of payment method to catch on in a widespread manner. But, it is still pretty cool, and we think it is something worth taking a closer look at!

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The Benefits of Using William Paid for Rent Payments

No one likes checks anymore.  They’re the least popular kid at the party, the one people keep having to invite but no one likes.  They’re antiquated, inefficient, and don’t earn points.  Why would anyone like them?

That’s where William Paid comes in handy, when you need to pay that monthly bill everyone hates- rent.  William Paid makes it easy to sign up.  The first step is doing just that.  You do not need any sort of ‘approval’ before signing up, and William Paid claims to work with any landlord.  Another nice thing that you could use is when it comes to split rent with roommates, which was always a pain under the “one check” system my former landlord employed.
 

Several Payment Options

Debit

There are several ways to pay your rent through William Paid.  The first is the simplest- your bank account.  The company electronically debits your bank accounts and pays your rent automatically.  The cost to you is absolutely free.

Credit

The second option is using a credit or debit card (which could earn you points!).  The fee for using this option is a little steep, though, at 2.95% of the total payment.  That could be $29.50 for every $1000 of rent you pay, washing away any value most points can get you.

Cash

An extremely convenient option for those that do not have checks or credit cards, cash is also a way to pay your rent with William Paid.  There are apparently 45,000 drop off locations nationwide, and all you pay is a $10 flat fee (great for large rent payments).  Finally, an interesting option for those that can’t make rent each month, you can do a combination of any of the above options, for a 2.95% rate fee.
 

Credit Reporting

Another benefit of this service is that you can help build your credit by having William Paid report your positive payment history to Experian. All you have to do is opt-in to have your payments reported to Experian RentBureau. You provide them with a copy of your lease and some other information, they confirm with your landlord, and voila!  Make this one step easier by making your payments automatic each month.
 

No contracts, No worries

The interesting aspect of William Paid is that there is no contract, so you can stop using the system at anytime.  All payments are safe, since they are held in an FDIC-insured partner bank.

So, you’re probably worried that your landlord won’t take the payment, right?  Don’t be worried.  The company cuts your landlord a boring paper check and sends it on its way to wherever you dictate.  And, if William Paid accidentally makes your rent late, they’ll reimburse you $50.

 

Conclusion

William Paid has made 21st century rent payment incredibly easy with its simple fee structure, ease of adoption for landlords, and excellent customer service.  Seriously.  But, I wouldn’t say that it’s a great option for those that want to pay their rent with their credit cards that can do so with cash or bank account.

The percentage fee that the company tacks onto rents paid by card is certainly a fair sum, but unfortunately is greater than the value that many points or miles you may earn from your cards.  There are exceptions, sure, and all depends on how you redeem your points, but is a little disappointing since there still isn’t a solid option out there.

Regardless, if you need another option other than cash or check, William Paid is the company for you.  Ever use the service?  Let us know how it went in the comments!

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Using ChargeSmart to Pay Your Mortgage and Earn Points

For me, my daily struggle is finding innovative ways to earn more points.  There are many ways out there, simply by putting all of your purchases on a credit card.  But, after you do that, where do you expand?  Where do you go to find those hidden points?

For me, that answer lies in rent and mortgage payments.  Normally done through check, it is now possible to do so via credit card with ChargeSmart.  Let’s dig into the nitty gritty details and see if ChargeSmart can help you earn some more points and miles!

 

How ChargeSmart Works

ChargeSmart works in a simple fashion.  All you would need is the address that you normally mail the payment to, the account number with the biller, and the amount that you have to pay.  After selecting how you’d like to pay, it is processed and sent to the biller.  The whole process takes about 2 or three business days.

The types of payments that you can make are endless, including mortgages, auto loan/leases, education loans, utility bills and many more.  You can use Visa, MasterCard, Discover, or American Express to fund these payments, but it is up to biller to accept certain card types.

The biller is the one who decides how much the transaction costs, which could be a “blended,” including a percentage of the payment, or a flat fee. You’ll see this fee before you submit your payment.

I think this is a positive development in the world.  Cash and checks are going the way of the dinosaur (there have even been discussions in Sweden about eliminating cash altogether!).  Today, many people don’t even have checks to begin with!  The ChargeSmart method is a great way to eliminate the hassle of paper payment instruments.

Now, there are a few caveats that may cause you to not utilize ChargeSmart, none of which are the fault of the company.  For one, your bank that you are making payments to may not accept these types of payments.  Even worse, if they do accept these types of payments, the fees associated with the transaction may cost more than the points that you would earn.

Below is an example of the fee associated with a $1500 Chase Mortgage payment. You would have to pay $38.99 to pay your bill through ChargeSmart.

This may seem like a lot, but I could see an argument for paying this to help meet a minimum spending requirement for a sign-up bonus, or meet a spending tier bonus on a rewards credit card. But it all depends on if the rewards outweigh the fee and if ChargeSmart is the right route for you.

 

Conclusion

ChargeSmart is a revolutionary new tool that fulfills a need in America.  Checks need to die a fast death.  ChargeSmart speeds up payments to two to three days, much faster than a check.  In a world filled with instantaneous transactions, it does not make sense to continue on with paper.

However, the fee structure that your biller imposes on you may make you think twice about using ChargeSmart.  I think for an individual landlord, a $2 or $3 fee each month is not going to break the bank, but if a bank is charging you two or three percent of each mortgage payment, you’ll be sticking to bank transfers I take it!

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5 Steps to Getting Out of Debt

If you are like many Americans, you may be finding yourself over your head in debt. With many losing jobs yet having rising expenses, people are not only becoming more accustomed to living on credit, but also becoming less likely to be able to pay all of their bills.

Once you start riding the slippery slope of skipping payments, you begin accruing various penalty charges, higher interest rates and more. Soon, your debt load will be impossible to pay. For some, bankruptcy may be inevitable. But, long before that, you are hopefully taking some significant steps toward getting out of debt and learning how to live as a financially responsible person!

Here are five steps to take that will help you get out of debt:

1. Assess Your Income and Your Spending

This means writing down exactly how much money you make each week or month, and exactly where every dollar is spent. Once you document where every dollar comes from and goes to, you will start to see some distinct patterns. Analyze the information carefully. Some guidelines to consider are spending no more than 25% of your total net income on housing (rent or mortgage), and no more than 60% of your total income on all of your loans (mortgage, auto, personal, student, etc.) and credit card minimum payments each month. These guidelines may seem tight, but they come from the basic qualifications that banks look for in a potential homeowner, making them fairly solid guidelines to follow for good financial health.

2. Get a Comprehensive Credit Report

Find out what your credit score is, and what factors are affecting it. Make sure that everything listed in the credit report actually belongs to you—you would be shocked to realize how many credit reports contain serious errors. As you get out of debt and watch your credit score rise, you want to ensure that all of the information is accurate.

3. Make a Budget

Of course, if you are like most people, after step #1, you will be horrified to discover that you are nowhere near these guidelines. So, where are you spending your money? Start out by listing the things that you cannot avoid paying for (housing, transportation, food, utilities, student loans), then list your other monthly expenses and the exact amount you can allot for each. Be sure to include some sort of savings, experts recommend that you put away at least 10% of your net income to save for unexpected expenses or your future.

4. Cut Out Unnecessary Expenses

Are there things that you can live without? Do you really need to have 600 channels on your cable service? Can you make your coffee at home in the morning instead of spending several dollars on the way to work each day? How about a bag lunch a few days a week? Are you using your gym membership (although you should be, if you are not then you should cancel and get out of the monthly fee). Watch your utility usage—turn your heat or air conditioning down and replace your light bulbs with energy efficient versions. Each of the costs that you cut will leave more money in your budget that can be put toward getting out of debt.

5. Start Paying Off Your Debt!

There are two functional ways to do this—one helps you get out of debt, and the other may help you set smaller, interim goals that will help keep you on track. The fastest way to get out of debt is certainly to put as much money as you can toward paying off your highest interest loans and credit cards. The faster you pay these off, the more you are going to save. But, if these accounts have large balances, this may seem like a very daunting task. This leaves another option, paying off the smallest debts first, so that you can essentially “cross them off of the list.”

When you start seeing the list of people or companies that you owe money to start getting smaller, you can see your progress—which can be highly motivating. Plus, even though these might be smaller amounts, you can then take the money that you put toward each of these monthly payments and put it toward the next largest bills. As you pay off smaller debts, you will start to have more money per month to put toward the larger bills.

Conclusion

If you follow these guidelines, you will find that your debt slowly but surely will go down. If you are finding it difficult to make ends meet, consider finding a second job to get some extra income, and then be sure to put that extra income toward paying off your debt! You may never be completely debt-free, but you will find that you are much more comfortable!

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What is a FICO Credit Score?

I remember back in college, that no one knew a thing about credit scores.  ‘If you leave 20% on your card each month, you’ll have a higher credit score, because credit card companies like seeing that they are making money off of you.’  Having the gut reaction that this just wasn’t true, I decided to investigate what truly makes up your credit score.  Your “credit score’ is really your FICO score, determined by a number of factors in your life.  Ranging from 300 to 850, having a better credit score can allow you to borrow money cheaper than others, obtain a home loan, a car loan, or in our case, receive rewards earning credit cards!  Here’s how it’s determined:

 

35% Payment History

This is where not paying your credit card bills most affects you.  If you want to have a good credit score, be sure to pay at least the minimum payment each month, or face a much higher interest rate on your payments.  I always maintain that to get the best value out of your travel credit cards, spend only what you can pay off each month.  Every dollar in interest takes away from the value of the points you receive from the card.  I’ve heard horror stories of people running up large bills on their cards to meet spending requirements, or ‘earn’ points, but in reality, they are only hurting themselves with bills they cannot pay back.

 

30% Credit Utilization

This is the outstanding debt on your account.  Typically, you want to keep your outstanding balance below 20% of your total credit.  So, if you had a $10,000 credit line, keeping your spending below $2,000 will help your score greatly.  A misconception that I hear often is that having too many cards open can hurt your credit score.  As someone who has quite a bit of cards, this simply is not the case.  However, if you are using all of that credit each month, that is a bad thing in the eyes of FICO.

 

15% Credit History

The longer you have credit, the more at ease banks are with lending you money.  It’s that simple.  Also, NEVER cancel your first credit card, as it will wipe away a lot of your credit history in the process.  This will then ‘shorten’ your history in the eyes of FICO, and as such, negatively drive down your score.

 

10% Types of Credit

This means having student loans, credit cars, mortgages, etc.  The more types of credit you have, the more responsible you look to credit agencies.  I live by the rule to never borrow if you don’t have to, but if you do over several different types of loans, might as well help your score in the process!

 

10% Credit Inquiries

This affects us travel credit card users the most, since we apply for so many cards.  While 10% in the grand scheme of things isn’t a lot, and this portion of your credit score is most often refreshed, it’s always good to minimize the amount of credit inquiries on any account.

 

Conclusion

That’s a basic primer on your FICO score, and what credit is.  Knowing your score can better assist you in determining if you will be approved for some of the wonderful credit cards out there.  If you have any questions, please feel free to sound off below in the comments!

 

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Citibank Secured Credit Card Review

The Citibank Secured card offers interest on your deposit.

If you’ve already looked into the Citi Secured MasterCard, you might be a bit confused, since there doesn’t seem to be any mention of it in the Citibank website. Your eyes aren’t fooling you – it isn’t there. In order to get the details on this card, you need to head to a Citibank branch and talk with someone about it in person. They won’t even tell you over the phone. Pretty lame. Here’s another (better) secured card you can apply for right now – First Progress Platinum Prestige MasterCard® Secured Credit Card

Luckily, we did that leg work for you! Here’s the low-down on this secretive card.

Applying

As you might guess, you have to apply in person, and then it can take up to four weeks for your application to be processed. That’s a long wait for a secured card.

On the bright side, we were assured this card is easy to qualify for. That’s not saying much for a fully secured card such as this one, and customers report varying experiences. What’s clear is that not everybody gets accepted. However, the manager we interviewed claimed that there are few reasons not to accept an applicant, since the account is fully secured. Most likely, you should not have any major financial snafus such as recent bankruptcy, and not request a credit line that is too big.

Security Deposit/Credit Line

This card is “fully secured,” which means that your credit line will exactly equal your security deposit. The Citi Secured card functions on a “name your deposit” principle, with a minimum deposit of $200. Interestingly, the Citi representative informed us that there is no formal upper limit on requested deposits, but that the bank won’t issue something ridiculous like “thousands of dollars” to someone with a very low credit score. Other sources claim that you should consider this card to carry a $5000 maximum on the deposit.

If you can afford it, choosing a larger deposit can be a good way to accelerate rebuilding your credit score. That’s because if you have a higher credit limit but your spending remains the same, you end up using a lower percentage of your available credit. In other words, you have a lower credit utilization ratio, which helps improve your credit score. If this strategy interests you, you could check out the Wells Fargo Secured card, which offers a higher maximum deposit but doesn’t pay interest.

The Citi Secured card, on the other hand, does pay interest. Once you open the account, your deposit is put into a 1-year CD carrying a 1.01% APR. That’s pretty solid! If you were to establish the account with a $5000 deposit, you would get $50 after a year.

Remember, a CD is a special kind of account that you can’t touch for a specified period of time, or else pay a penalty fee. In the case of the Citi Secured card, the CD has to remain untouched for at least one year, if you want to avoid paying the penalty fee. Since the CD is linked to your secured card, the deposit remains completely inaccessible to you until you close the account.

Graduation

There is no automatic graduation option for the Citi Secured card, but you are welcome to apply for a “real” credit card with Citi after some time. The Citibank manager we interviewed recommended waiting at least 18 months after opening the secured card to apply, keeping credit utilization below 50%, and always paying on time and in full for the best chances at getting accepted for a better card.

Unfortunately, if you do get accepted for a real card with Citi, there is no conversion option. That means that you will have to close the secured card account and open a new one for the new card. We prefer secured cards that allow you to simply convert the account into a non-secured version, because then you don’t affect the length of your credit history. (Having a longer credit history is good for your credit score.)

The Rest

The Citi Secured card carries a $29 annual fee and 18.24% APR. These numbers are average for a secured card from a major bank. Unfortunately, the benefits are sparse – this card doesn’t offer purchase protections, insurance, warranty extensions, etc. But to be fair, secured cards that do offer those benefits are few in number. (One that does is the Digital Federal Credit Union Secured card.)

The Citi Secured card isn’t perfect, but it offers the best interest rate we’ve seen from a secured card. If you have to put a big chunk of cash away for a while, it might as well be growing while you wait.

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Paying More than the Minimum

It can be very tempting to use your credit card for all your spending, and then only pay off the minimum every month. It is, as we all know, how the credit companies make money – by you paying interest on your owed balance. So, if you’re only required to pay a certain amount each month, then why pay more? It’s pretty simple. Paying the minimum is setting yourself up for costly long-term payment plans, and you’ll be paying a huge percentage of your cash toward interest.

Your minimum payment is calculated as a percentage of the total balance you owe. After you pay the minimum, what you have left over then accrues interest, a rate that is a percentage of what you owe in addition to your balance.

Put simply, making only the minimum payments will force you to end up paying much more in the end. It’s understandable that not everyone can pay their balance in full every month, especially if a cycle of increasing interest has already begun – but it’s a bad habit to start. If you have to only pay the minimum, try making up for it by paying more than usual the next month, or even better – paying it off in full. Credit card companies will reel you in with their advertised low monthly minimums, but remember that it’s merely a curtain over high interest rates.

To prevent yourself from falling into credit card debt that you can’t crawl out of, watch what you’re spending on your card. Using your credit card to pay for everything can be useful if you’re going to pay it off in full at the end of the month, but if not, try to only use it when necessary, and when you know you’ll be able to pay it off. Examine how you can cut your spending if you’re already in debt. Setting cash aside from every paycheck and using it to pay more off of your balance every month is a good way to start getting back on track with your payments. If you have the cash sitting around, but you’re saving for other things, break yourself of the “minimum payment mindset.”

Making minimum payments on cards is a trap many people fall into. Credit cards are a financial tool like any other, and they’re a huge asset when used correctly. Incorrect or abusive use, however, can lead down a pretty dark debt road. Be sure to educate yourself on your credit card’s interest rates and make a smart decision on how much to pay each month based on your needs and flexibility.