Credit Card Tips and Tricks to Save Money

  1. Banks make money from you on interest and fees, including late fees and annual fees. You can control those; you don’t have to pay any interest or fees unless you do something you agreed to. They make money from merchants on interchange fees of 2 to 4 percent. Merchants do not usually charge more for credit transactions, though they could in some cases. Interchange fees are higher if the card is not physically present, if you are getting rewards, and on American Express transactions.
  2. Your ongoing rewards come from these interchange fees. Initial spending bonuses come from the bank as a marketing cost. You can choose different types of rewards: cash, miles, or points that turn into cash or miles. You have to decide which you want, there’s no universally best choice. (Asking someone else what is the best card for you is generally futile, since they won’t know what works best for you.) Cash is, well, cash. Miles/ points can be worth more than cash, but only if you would spend them anyway. The best initial spending bonuses will be miles / points. If you don’t mind the impact of getting additional cards and can meet the spending targets, the best rewards percentages come from collecting initial spending bonuses; these can be 10% or more of that initial spending.
  3. The very best initial spending bonuses come from cards with annual fees; you have to factor that into the equation, but you still can come out ahead in the same 10% range on initial spend, especially if fees are waived first year. You may not want to keep paying annual fees, though, so this is where a product change comes in. Before the fee comes due, you can ask to switch to a card with no annual fee, but keep the same card number, credit limit and history. You don’t get an initial spending bonus with the new product, but you would get other benefits.
  4. Ask for what you want; some things are negotiable. You can sometimes get fees like annual fees or late feeswaived as a courtesy if you are otherwise a good customer and they want to retain your busines. You can almost always get the statement billing / due dates changed to something that works better for you, just by asking.
  5. Let’s look at some other things you can get with credit cards. My Chase Sapphire Preferred card provides these, described in a 47 page booklet full of small print covering details: a) car rental collision damage waiver, as primary coverage; I can decline the car rental company “insurance” without concern; b) various types of purchase protections, including extended warranty coverage, price protection, and return protection; c) trip cancellation / interruption insurance, due to e.g. accident/sickness, severe weather, or travel company bankruptcy; d) lost luggage, trip delay and travel accident benefits. e) This card also provides no fees on transactions in foreign currencies. Credit cards provide better exchange rates than cash / ATMs.
  6. We alluded to consumer legal protections previously. The two cases that are most important to you are: 1) if a card is lost or stolen (or, the number breached in any other way, even if the card is not physically involved…), your liability is legally limited to $50, and in practice, is usually zero. You do not have to pay for charges you did not authorize. Note that in this case, you card will be cancelled and re-issued with a new number, but the same credit limit and history. 2) if a merchant charges you something you disagree with, e.g. overcharge or defective product, you have the right to contest the charge, and the amount in question will be excluded from your bill until the dispute is finalized. Debit cards do not have to offer these same protections; for example, lost debit card liability can exceed $50 if not reported in 48 hours, and banks do not need to reverse debit card charges during disputes.
  7. Balance transfers can be helpful if you transfer to a 0% promotional rate card, but watch out for fees. You may be charged one-time interest of 3% or so. Cards from banks like Citibank allow you to transfer balances from student loans and car loans, too. Don’t get carried away though, since the term of these loans is very limited, and then interest goes up substantially. Be sure to read the fine print in your credit card disclosure about how balance transfers and new charges interact in terms of how payments are applied, too.
  8. Cash advances from credit cards are never a good idea. Your credit card is not an ATM card. This also applies to so-called “convenience checks.” You are typically charged a one-time fee of a few percent, have a higher interest rate, and, most importantly, you get no grace period on these transactions. Just say no.
  9. If you have self-employment income, you can apply for a small business card. This allows you to keep business expenses distinct from personal expenses, which can be helpful at tax time. Some small business cards also do not report against consumer credit bureaus, which may be a help if you want to minimize the impact of business utilization on your personal credit score. (But you could not use this to help your consumer credit history.)
  10. Final plug for being responsible. Only use a credit card as you would use an old-school charge card, where you pay off the balance in full each month. We’ve already explained that paying the minimum only is a disaster, but then that’s exceeded if you become 60 days late on payments, which will invoke not only late fees, but also penalty interest of 30% for at least six month. This can also result in increased interest rates on cards that you are not late on!

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