Friday, October 30, 2020
Education Tips

5 Pieces Of Credit Advice From Experts

When it comes to personal finance advice, credit card experts have a lot to offer.

In our research and interviews over the past year, CNBC Select has come across dozens of people who have tips to pass on to the next generation of credit card users.

From experts at the three main credit bureaus Experian, Equifax and TransUnion, to credit users with perfect scores, certified financial planners and personal finance book authors, we have heard all sorts of tips and tricks about how to use credit cards responsibly. And while some advice differs, it all comes down to knowing your own money habits and sticking to a few tried-and-true basics.

Below, we rounded up some of our favorite advice that is, more or less, universally agreed-upon.

In a year of asking experts their credit advice, here are five things they can agree on.

1. Know what you can and cannot afford

With credit card bills becoming the biggest source of debt for millennials, it’s important now more than ever that cardholders know what they can and cannot afford before charging any purchases onto their credit cards.

“I’ve always said that credit cards aren’t for everyone,” says Rod Griffin, Experian’s senior director of consumer education and advocacy. Whereas some people manage money just fine using credit then paying it off, others might prefer paying in cash or on a debit card so it’s easier to stay on track.

For Jim Droske, who has a perfect credit score, he credits his good score to never spending more than he normally would just because he has the flexibility of paying with credit.

Credit cards make it easy to charge more than you can afford, which can lead to bigger financial problems down the road. This doesn’t just hurt your wallet but your overall access to credit.

Cardholders should make a spreadsheet each month that can help them track what gets charged onto their credit card and other expenses, argues Beverly Anderson, president of global consumer solutions at Equifax.

“A consumer should look at how much they’re making and what they’re spending. Knowing exactly where you stand and what you can afford may help you better manage financial commitments.”

In fact, Anderson says that not having a budget is one of the top reasons people get into credit card debt.

Learn more: The top reasons people get into credit card debt—and how to avoid them, from an Equifax expert

2. Keep an eye on your credit score

Droske, who is president of Illinois Credit Services, a credit counseling company, has long been obsessed with tracking his credit score.

“The more you pay attention to it, the better your credit tends to be,” Droske says.

While you can go days without checking your score, it’s important to monitor it every now and then, and especially to see how changes in your credit report make an impact.

Consider signing up for a credit monitoring service that helps you track updates to your credit report and credit score in real time. CNBC Select ranked our favorite picks and two that made the list for their zero-cost services include CreditWise® from Capital One and Experian free credit monitoring.

CreditWise® from Capital One

Information about CreditWise has been collected independently by CNBC and has not been reviewed or provided by the company prior to publication.

  • Cost

  • Credit bureaus monitored

  • Credit scoring model used

  • Dark web scan

  • Identity insurance

Experian Free Credit Monitoring

Experian Free Credit Monitoring

Information about Experian free credit monitoring has been collected independently by CNBC and has not been reviewed or provided by the company prior to publication.

  • Cost

  • Credit bureaus monitored

  • Credit scoring model used

  • Dark web scan

  • Identity insurance

3. Pay your bills on time

4. Shop around for the best credit card for YOU

Citi® Double Cash Card

Citi® Double Cash Card

On Citi’s secure site

  • Rewards

    2% cash back: 1% on all purchases and an additional 1% after you pay your credit card bill

  • Welcome bonus

  • Annual fee

  • Intro APR

    0% for the first 18 months on balance transfers; N/A for purchases

  • Regular APR

    13.99% – 23.99% variable on purchases and balance transfers

  • Balance transfer fee

  • Foreign transaction fee

  • Credit needed

Pros

  • 2% cash back on all purchases
  • Simple cash-back program that doesn’t require activation or spending caps
  • One of the longest intro periods for balance transfers at 18 months

Cons

  • No welcome bonus, so you can’t maximize rewards during the first few months of card opening
  • Minimum cash-back redemption of $25
  • 3% fee charged on purchases made outside the U.S.
  • Estimated rewards earned after 1 year: $443
  • Estimated rewards earned after 5 years: $2,213

5. Pay your bills in full to avoid interest

When you can afford to do so, always pay your credit card bill in full so you never carry a balance.

With interest accruing daily, these revolving balances can cause your credit card debt to balloon quickly. And it’s not just the large purchases to watch out for, a series of small impulse splurges can also set you back if not immediately paid off.

“For example, let’s say you have a $1,400 balance from multiple dinners out and events with friends on a credit card with a 19.99% APR,” says Bola Sokunbi, a certified financial education instructor and author of “Clever Girl Finance.” “If your minimum payment is $70 a month, it would take you 25 months to pay it off, paying over $300 in interest.”

Carrying a balance is also against Droske’s number-one rule. “I almost always pay it off in full at the end,” he says. His best advice to credit users is to not charge something if you can’t pay for it in full.

You can keep your credit card balance low when financing debt or new purchases by using a 0% APR credit card. The Citi Simplicity® Card offers zero interest for the first 18 months on balance transfers and new purchases (after 14.74% to 24.74% variable APR). Keep in mind these cards require good to excellent credit to qualify.

Citi Simplicity® Card – No Late Fees Ever

Citi Simplicity® Card - No Late Fees Ever

Information about the Citi Simplicity® Card has been collected independently by CNBC and has not been reviewed or provided by the issuer of the card prior to publication.

  • Rewards

  • Welcome bonus

  • Annual fee

  • Intro APR

    0% for the first 18 months on purchases and balance transfers

  • Regular APR

    14.74% to 24.74% variable

  • Balance transfer fee

  • Foreign transaction fee

  • Credit needed

Pros

  • 18 months of no interest on purchases and balance transfers
  • No annual fee
  • Balances can be transferred within 4 months from account opening

Cons

  • 3% foreign transaction fee
  • No rewards program
  • Transfer timeline: Balances must be transferred within 4 months from account opening
  • Estimated total fees and interest on debt repayment: $595

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the CNBC Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.

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