Saturday, November 11, 2017

You Only Need These Two Types Of Credit Cards For All Your Credit Needs

How many credit cards should someone own?  That's the topic of today's post.  I happen to own just two, but I erred in that the two fall within the standard, run-of-the-mill types of credit cards, high credit limits and no annual fees.  I've owned a Chase Visa Freedom card ($10,800 credit limit) since 1999!  I've also owned an Amex Everyday Card ($28,200 credit limit) since 2003.  Once in a while I'll participate in the occasional promotional cashback rewards program my Chase card mails me about.  You know, where they tell you to buy at certain retailers and you'll earn 3-5% cashback on all purchases.  I'm not an active credit card user, but I probably would be if I had opened up two specific types of credit cards.

First, being an active credit card user doesn't mean you have a spending problem.  Or for that matter that you're seriously crippled by your debt.  On the contrary, one can use a credit card responsibly, paying off every last expense at the end of the month and never having to pay any interest for card balances.  Why would someone have their credit card be their go-to way of paying for everyday things?  Why not just use your ATM debit card linked directly to your checking account?  Because of the perks credit cards offer! knew this already.

If you're currently in the market for a credit card, I suggest you consider getting or having two, and be done with it.  But which two types of credit cards should you possess?  The answer:

1) One that focuses on cashback rewards, AND
2) One that specializes in travel rewards.

Image result for cashback credit card points

Let's breakdown how to shop for each of the two main types of credit cards starting with the cashback reward variety.

Cashback Reward Cards

When shopping for a credit card that offers cashback rewards, the criteria you must use to weed out the good ones from the bad ones include:

1.  Lowest "Purchase APR."  The Purchase APR is the interest rate you'll pay on any outstanding credit card balance.  Purchase APR are based on your credit worthiness, but the range (of what you may pay in APR) given to you by a credit card company is comparable.  Do not be swayed by 0% promotional APR's.  When the promotional time expires, you're stuck paying the Purchase APR.

2.  No annual fee.  Unless you're wealthy and want to be part of some rich club, getting a credit card with an annual fee is stupid.  Eliminate any credit card with annual fees from consideration.

3.  Foreign Transaction fees.  You shouldn't have to pay for using your credit card to make purchases out of the country or from vendors abroad.  We want zero FT fees!

4.  0% Intro APR on Balance Transfers for as long as possible.  If one credit card gives you a 0% Intro APR on balance transfers for 12 months and another for 14 months with all else being equal (see 1 to 3 above) then go with the one with the extra two months.  Hey, you never know if you'll need to transfer debt from a credit card with a higher Purchase APR to one with a lower one.

5.  The most introductory perks.  Credit card companies are very creative when it comes to getting you to open up an account.  In the case of cashback reward cards, you'll want,

a) 1st year cashback match by the credit card company, meaning you earn 2X the cashback dollar amount for your first year,

b) 5% cashback rewards on category purchases with at least a $1,500 quarterly max; if you find a credit card that will let you earn more than $1500 in cash per quarter, great!

c) 1% cashback on all purchases not in a promotional category with no limit how much you can earn,

d) Cash rewards that are redeemable whenever and in any quantity,

e) Direct deposit of the cash you earn into your bank account or to use to pay off your card account.

f) Favorable conversion ratios.  Your points add up to dollar amounts, but when redeeming them, you need to pay attention to how many points will get you a particular gift card.  You may be able to get the same gift card for fewer points at a different store.

g) $1 in cashback = $1 at checkout.  It's that simple.  Anything less is junk.

Travel Reward Cards

To begin on the right foot with a travel reward card you must abide by criteria 1, 2 (most will only do a promotional $0 intro annual fee for the first year then charge an annual fee after that; get the one with the lowest annual fee!), and 3 from above.  If you can find a travel reward card that offers 0% Intro APR on balance transfers for a given time period, you're in luck.  Most won't do this type of promo, but will advertise $0 in fees at least for any balance transfer.  Other criteria to rate a card include:

The best introductory perks and offers.  For example:

a) The highest one-time bonus point offer when spending a certain amount within the first 1-3 months.  Don't screw this up!  If a card offers you 50,000 points (say a $500 value) for $3K in purchases within the first three months, then spend the $3K in 3 months!  Just pay off the balance each month.

b) Unlimited 2X the miles on every purchase, i.e., $1 spent = 2 reward miles.

c) Fly any airline and stay at any hotel ANY TIME.  Restrictions suck! Don't get a card with airline or hotel restrictions.

d) No Blackout dates.  Your card should let you travel whenever the heck you want.  If not, close the account and get one that does.

e)  No expiration of your miles ever!  So long as you maintain the account open, you should never have to worry about your miles expiring.

Alright my peeps, I've given you a breakdown of how to shop for the two types of credit cards you'll ever need.  When I opened my two credit cards way back when, I only cared that they had low Purchase APRs and no annual fees.  There is so much more value to a credit card these days.  They can be like savings vehicles if you opened an account with the right company, and if you pay off all your debt at the end of the month.  Happy credit card shopping!

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