by Lyle Daly | March 27, 2019
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Are you missing some important credit card knowledge?
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Credit cards are an area where the average consumer is somewhat ill-informed. There’s all kinds of misinformation about credit cards, and people often take it to heart.
A lack of knowledge regarding credit cards can have real repercussions, as it can affect your credit score and how much value you get every time you make a purchase. That’s why I’m breaking down the things I learned about credit cards too late and why they’re so important.
I’m sure I wasn’t the only one who had a negative impression of credit cards as a young adult. Peers would warn each other about high interest rates and the dangers of credit card debt, and I figured there was no good reason to get a card of my own.
The reality is that a credit card is the most effective way to build your credit score. If you take your time getting a credit card, it will take you longer to improve your credit. That means you’ll probably need to get a cosigner for something as simple as renting an apartment, and you could be stuck paying a deposit to get your utilities set up.
Using a credit card responsibly:
For those reasons, it’s smart to get a credit card as soon as you can, even if you need to start with secured credit cards or student credit cards.
I wised up and got a credit card eventually, and about a year later, I got my first rewards card. I was ecstatic at the prospect of earning points on all my expenses.
However, the card earned a mere 1 point per $1 on all spending, and the redemption options were limited to getting cash back at a value of $0.01 per point or using my points to purchase a product from the card issuer’s rewards shopping portal.
When it comes to credit card rewards, “better than nothing” just isn’t good enough. Had I bothered to research the best credit cards first, I would have found plenty that earned more points per dollar and offered more valuable ways to redeem my points.
In the days when I was less financially responsible, I’d carry a credit card balance from month to month. It was nothing crazy, but I was paying interest for no good reason, and it was all because I got careless with my spending.
I made the typical credit card mistakes. I spent money I didn’t have because I figured I’d earn that money by the time my payment was due. I’d guesstimate how much I could afford instead of using a budget. Surprise, surprise -- my guesstimates always painted an overly optimistic view of my finances.
Credit card interest is too high to carry a balance, and that’s why you should always:
Like many consumers, I assumed that when a credit card company makes a decision, it’s final, and you’re essentially stuck with whatever terms your card issuer gives you.
That couldn’t be further from the truth. In fact, credit card companies are open to negotiation on quite a few things regarding their cards, including:
It’s easy to miss key details of credit card offers, and that can end up being costly. I’ve made this mistake before when I mixed up which of my new credit cards had a 0% APR intro offer, which resulted in paying unnecessary interest. It wasn’t that costly, but I did feel like a dunce for making such a simple mistake.
Whenever you’re taking advantage of a credit card offer, make sure you understand all the rules. Here are a few common examples:
There’s a lot I wish I had learned about credit cards sooner. If any of the tips above are news to you, use my mistakes as a learning experience so you don’t make them, too.
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