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Credit cards are the cause of a lot a fear, but when you use your cards the way they were intended they can provide you with the financial power you need to make important strides in your life. While there are some serious risks associated with credit, your success all boils down to the care and attention you put into optimizing your credit usage.
Once you’ve gotten the hang of your credit routine, it’s time to set your gears toward strengthening your credit score and milking the benefits from your specific card.
If you’re ready to take your credit habits to the next level, this is a great place to start. Here is our guide to making the most out of your card and beyond.
Use Your Credit Card Like A Pro
Establishing good credit is imperative to your financial future, but your credit is not a single step process. Continue building and expending upon good habits to get even closer to the coveted 800 score.
Here are the credit habits that the pros recommend.
The Benefit of Midcycle Payments
It’s no secret that credit card debt should be avoided at all costs. It can lead to high interest charges, financial stress, and damage to credit scores. When a credit card balance is not paid off in full each month, interest is charged on the remaining balance, which can quickly add up and become detrimental to your financial future.
Paying off your balance in full every time is what’s going to keep you as safe from debt as possible, but there is a little-known secret to credit payment that should be on your radar.
Paying the entirety of your credit card balance mid-cycle can positively impact your credit utilization.
Your credit utilization is the amount of credit you are using compared to the amount of credit available to you. It is typically expressed as a percentage and is calculated by dividing your total outstanding credit card balances by your total credit limits.
So, if your credit limit is set at $1,000 and you have a balance of $500, your credit utilization at that time is 50%. Your credit utilization is an important aspect to your credit score, making up 30% of your FICO score.
But your card issuer doesn’t typically report your credit utilization until the end of your billing cycle. Making a mid-cycle payment could reduce your credit utilization, which is recommended to stay at 30% or below.
Use Multiple Cards
Using multiple credit cards can increase your buying power without putting too much strain in your credit utilization. But keeping track of multiple cards can become a difficult task to juggle.
Only open more than one card if you can handle multiple cards with the same tenacity as a single card. If your objective is to maintain a healthy credit score, consider keeping multiple cards but don’t open more than three.
Know What Gets you Cash Back
Every card has a different cash back program, and some are better than others. Do your research and keep a log of what purchases will help you earn cash back and pivot your purchases between cards with the best rewards.
For example, if one card gets you 5% cash back on groceries, you’re going to want to use that card in lieu of a gas rewards card at the supermarket. Anticipate your expenses in every category of your life and assign a credit card to each of them so you can manage your funds with ease.
What is a Rewards Card?
If you’re looking to expand your purchasing power with a new credit card, shop your options to find one that will serve you the most.
Types of Rewards Cards
If you have a good credit score, credit card companies should be fighting tooth and nail to get your business. This is why you should not take the first credit card offer that comes your way.
Take some time to shop, compare, and sleep on it. This is a chance for you to leverage your good habits to get what you really want- perks and benefits.
Here are some credit rewards that you should keep an eye out for the next time you’re searching for a new card.
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Cash Back
Earn small percentages of cash back for purchases made on the card. Redeem you cash back through a portal with your card issuer or deduct your cash back total from your monthly bill. Cash back programs are best for those seeking simplicity in their credit card programs.
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Points
Earn points as you spend. Points are categorical, meaning that you can earn a different number of points for different types of purchases.
For example, the Chase Sapphire Preferred Card gives 5x points for travel, 3x points for streaming services, 2x points on online grocery purchases, and 1x points for all other purchases.
Points on this card are worth 1 cent, and can be redeemed as cash back, applied to your bill, or used for travel purchases. Point programs are best for those who want to maximize their rewards.
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Miles
Earn miles as you spend that can be redeemed at a major airline. This is best for frequent travelers.
Store Credit Cards
When checking out at big retailers like Amazon, Best Buy, and Macy’s you may have skipped through a prompt to sign up for a store credit card at the register. Usually, saying no is going to be your best bet. Store credit cards for one-off purchases or non-necessities can quickly become lost in your finances and accumulate hefty interest before you even know it.
But that’s not always the case.
Store credit cards can be used in the particular store they’re for and outside of it. But you will likely only get rewards and benefits for using the card with the specific retailer you signed on to. Store credit cards can be an asset for frequent shoppers or those managing the finances of a big family, but you should only sign up if a store credit card will serve your needs better than a traditional card would.
Let’s say you just bought a fixer upper house, and you’re planning on making countless runs to Lowe’s for your DIY needs until the project is complete. This would be a great time to take advantage of a Lowe’s card.
On the other hand, let’s say that your office is right next to a Macy’s, and you like to shop and occasionally splurge on your lunch break and could use some extra savings on these purchases. Should you get a Macy’s card? Probably not.
Your credit can be completely customized to your needs, and store cards can be a huge asset for you but only if you could truly benefit. Don’t give yourself permission to overspend on non-essentials by opening a card that you don’t need.
Things to Remember
Upkeeping your credit is a constant project, and there is always room to improve. Here’s what you need to remember from our guide to making the most out of your credit card.
- Customize your credit to your needs and skip of offers that will set you backward in your financial journey.
- Consider making mid-cycle payments to keep your credit utilization low, but always pay in full regardless of when you pay.
- If you have serval cards, make your purchases appropriately to maximize your cash back earnings every month.
- Treat all your cards with the same care and urgency to maintain a healthy credit score.