Be Credit-Card Smart – part 2.
Posted on December 22, 2007
Filed Under Advice, Balance Transfer | Comments Off
If you always pay your bills in full each month, congratulations. Make sure you’re using cards that pay you cash back or other rewards you prefer.
One new card, the Citi CashReturns MasterCard, pays 5% of all purchases back to you during the first three months. After that, the refund falls to 1%, though there’s no cap on what the bank will pay back each year, no annual fee and no expiration date on the refund.
If you’re doing a lot of shopping at one retailer, it may make sense to take the store up on its offer of, say, 10% off purchases that day if you open a credit-card account with the store and its bank partner.
Words of Warning
Some cards offer 0% interest on new purchases (as opposed to balance transfers) under various circumstances. Read the fine print carefully, however. Consumerworld.org’s Mr. Dworksy recently saw a card that requires customers to pay the interest for the entire promotional period on certain purchases if they don’t pay the whole balance off in the introductory period.
If you’re going to need a mortgage or other large loan in the next year or so, think twice about opening new credit-card accounts of any sort. Sometimes, doing so can cause your credit score to drop enough that it may affect the rates a lender will offer you.
Who should worry the most about this? It’s difficult to generalize. But Craig Watts, a spokesman for Fair Issac, which writes the formula for the widely used FICO credit score, says that people with little credit history (like those who are younger) or folks who have paid bills late recently are especially vulnerable.
Finally, keep in mind that the card company can levy late fees, raise your interest rate and yank your rewards for the month if you pay your bill late.
It’s easy to forget your bills when you’re traveling or busy with holiday plans. That makes now a good time to set up automated payments from your bank account, so that the card company pulls a set amount (or the full credit-card balance) from your bank on the due date each month.
Most credit-card companies will do this, though they don’t necessarily shout it from the rooftops. Once you set this up, your odds of paying late (and paying fees) go down dramatically. It’s one less thing to worry about — and it gives your card company a little bit less to celebrate this holiday season.
by Ron Lieber