Credit Card Basics – Tips that Can Help
Guest post from The Simple Dollar.
Signing up for any one of the best credit cards is a piece of cake, but do you know how to optimize them? Unfortunately, figuring out how to use the features your credit card offers isn’t always easy. Many times, the terms and conditions of the most lucrative perks are buried in the terms and conditions. Meanwhile, the rewards programs can be difficult to decipher, and the points, hard to redeem.
If you want to get the most out of your credit cards, the first thing you should do is arm yourself with information. These tips and strategies can help you do just that:
Read your credit card’s terms and conditions
The easiest way to gain a full understanding of what your card has to offer is to read the terms and conditions front to back. Many times, a slew of interesting tidbits regarding your rewards program and perks will be hidden in there. And if you don’t read the terms, you may never know about them. The bottom line: Read your card’s terms and conditions, as well as any other applicable paperwork or information on their rewards program, if you want to fully understand all that your card has to offer.
Optimize card usage based on features
Let’s say you have a credit card that offers primary rental car coverage for free. Whenever that’s the case, you should always use that card for rental cars. Why? Because it offers coverage equal to, or better than, your own car insurance policy – and all for zero cost. Meanwhile, if you should happen to get into a wreck or take on damage, you wouldn’t even have to turn the claim into your own car insurance policy. This is just one example of how to optimize card usage based on features, but there are plenty of others. When you have more than one credit card, it often pays to use different cards for different purchases if they offer certain types of coverage you can benefit from.
Research your rewards program
I can’t tell you how many times I have heard someone complain that they had trouble redeeming their airline miles. The thing is, if they had done any type of research ahead of time, they would already know that airline miles are incredibly difficult to redeem, especially during peak travel times and within a few months of departure. This is where it pays to educate yourself. If you plan to sign up for a card that is tied to a specific program, such as an airline or hotel chain, you should first have an idea of what you would want to redeem your points for – and if it’s even possible. If you don’t want to be tied down to a specific rewards currency, you can also opt for a cash-back card, or a card that offers flexible rewards, such as the Chase Sapphire Preferred® card.
Report Unauthorized Charges Immediately
In a world where more and more purchases are being made online, it is actually quite common for thieves to get your credit card number and use it to make a “test” purchase to see if you’re watching. This has happened me several times. Even though I watch my credit card accounts closely, I have occasionally come across a charge I didn’t make. When that happens, you need to report it to your credit card issuer immediately. Call the number on the back of your card and tell them about the fraudulent purchase. You won’t be liable for a penny if you report it immediately, and your card issuer will rectify the situation by issuing you a new card with a new account number.
Keep a Folder for Travel Documentation
When you’re traveling within your own country or abroad, you should always use a card that offers trip cancellation/trip interruption insurance as a card member perk. However, if you need to file a claim, you will be much better off if you already have all of your travel documentation in one place. In most cases, filing a travel insurance claim is free and easy – you do, however, need to have all of your documentation ready. So keep a folder on hand, and use it to store every piece of documentation you come across as you prepare to travel. You never know when you will need to file a claim, and you may be asked to present things that are hard to replicate later – paperwork like your paper boarding pass, train ticket, hotel reservation e-mail, or flight cancellation notification.
Take Advantage of Your Free FICO Score
Certain cards, like the Discover it® card, offer a free FICO score as a perk for their members. This is a great benefit that is often overlooked. To get the most out of it, keep any eye on the fluctuations in your credit score as you receive it on your statement each month. Look for huge dips in your credit score, and if that happens, try to find out why. Meanwhile, if your credit score is slowly increasing, you can rest easy with that knowledge.
Don’t Be Afraid to Get Multiple Cards
A huge misconception in the world of credit cards is that it is bad for your credit to have more than one or two cards. Because a large percentage of your credit score is based on your balance-to-limit ratio, having a large credit limit spread over several cards and a zero balance can actually be better for your credit score than just having a few cards. Meanwhile, carrying more than one card can also help you leverage the different benefits and perks that different types of rewards cards have to offer. For example, you could get a hotel card for free hotel stays and a cash-back card to help you pay for the gas to get to your destination.
Check Your Credit Report Once Per Year
In order to get the most out of your credit cards, it is essential for your credit score to remain high. That’s why it’s important to check your full credit report at least once per year. Fortunately, you can get a free copy of your credit report from the three credit reporting agencies – Experian, Equifax, and TransUnion – once per year through the government-approved site, www.AnnualCreditReport.com. once you get your free copy, take some time to read through it and ensure that all information reported is correct. According to the Federal Trade Commission, you can dispute incorrect information found on your report with any of the three credit reporting agencies. The FTC offers information on how to dispute incorrect information on their website, and offers a sample letter you can use.
For more information on best practices for using credit cards, visit The Simple Dollar.