Credit Card Advice

David Robinson, Chief Data Scientist at DataCamp, once tweeted:

When you’ve written the same code 3 times, write a function. When you’ve given the same advice 3 times, write a blog post.

I’ve recently given advice to a few family members about selecting a credit card so, in the spirit of David’s tweet, I’ve compiled some tips and information about credit cards.

Tips

1. To establish good credit, treat your credit card like a debit card. In other words, it’s good practice to only spend money on the card you know you have in your bank account. Paying off the card balance once (or more) per period is an important factor in establishing a high credit score.

2. Another important factor is the percent utilization of your credit limit. Your first card may have a credit limit of $1,000-2,000 but you should never get close to that limit. In fact, it’s recommended you only use 10-20% of your credit limit at a time. If you have a $1,000 credit limit, spend $150 on the card, pay it off with money from your bank account, and repeat.

3. Compare the rewards each card offers. Since I treat my credit cards like a debit card the only reason I use them is to (1) establish good credit and (2) earn rewards. The rewards can take many forms (cash back, points, miles, etc.) and are earned differently for different purchases (ex. 1% cash back on groceries, 3% cash back on gas) so it’s worth it to carefully compare the offerings.

4. Almost all credit card providers now offer a free way to monitor your credit score. It’s a good idea to check your credit score about once a quarter. That way once you need serious credit (to buy a car or home) you won’t have any surprises or find out that someone has taken loans in your name and ruined your credit.

My Cards

Discover [Link]

My wife and I both have a Discover card. It was a great card to start with because it was specifically targeted to college students with little to no income. We each had a credit line of $1,000. This card gives us unlimited 1% cash back on all purchases. I also got $20 each semester for good grades. To date, I think we’ve earned about $100 with cash back.

American Express [Link]
This was the second card I got. They offered more credit (about $10,000) and use a point system rather than cash back. There’s also a 20% “extra points benefit” if you exceed a certain number of transactions in a cycle.

Capital One “Venture” [Link]
This is our most recent card and the one who use for everything now. Since we are now interested in finding a way to pay for travel home, we wanted a card that offers good travel rewards. We get 2 miles for every dollar spent and earned 50,000 miles for spending $3,000 in the first three months. The link above takes you to page with more information about the card.

What cards do you use? What advice do you have about using credit wisely?

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Raymond Cooper
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I’m looking into getting my first credit card. I appreciate how you mention that paying off the card balance once or more per credit period can be a good way to ensure I establish a high credit score. I’ll keep this in mind for once I get a credit card.

Tiffany Locke
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Your advice to try and only use 10-20% of the credit card’s limit and pay it off is a good idea. This could help you avoid overspending or going over the limit and having any problems. When choosing one, it might help to consider what you’ll use it for as well as how much you spend so you can then research the various banks and companies that offer credit cards to figure out which one will be best and fit your lifestyle.