YOU MAY HAVE been using a
credit card since your early col-
lege years, but how well do you
really understand this money tool
(or—in the opinion of some—trap)?
From balance transfers to travel
rewards, credit protection to
authorized purchasers, we tackle
questions big and small to make
sure your cards work for you.Q: There seem to be
more credit card rewards
programs than hairs on
my head. How can I cut
through the crazy and
find one that fits me?If you are like 37 percent of
Americans and carry an ongoing
balance, you want a much differ-
ent card than someone who pays
in full every month. Look for
one perk: the lowest interest rate
you can find. Anything below 15
percent is solid, Game says, but
people with good to excellent
credit may qualify for an APR as
low as 7 percent.
If you don’t have significant
debt, then you can reap some
rewards. Consider the three main
options: Cash rewards cards typi-
cally offer 1 to 3 percent cash back
in categories like groceries and
gas (some offer up to 6 percent).
Cobranded store or airline cards
let you rack up freebies and
discounts in exchange for brand
loyalty. And travel cards, like
Capital One’s Venture Rewards,
allow you to redeem miles for
hotel stays, cruises, ride shares,
and other travel expenses.
Again, assess your habits. Cash
back for groceries, for example,
only kicks in if you actually buy
groceries—that 6 percent reward
doesn’t matter much if you’re
the Queen of Takeout. Likewise,
make sure you’d take advantage
of redeemed miles; hotel-related
rewards typically expire within
a year or two, Game says.
Once you’re circling in on your
final choices, check if there’s an
annual fee. “If there is one, you
really have to do the math,” says
Linda Sherry, director of national
priorities at Consumer Action, a
nonprofit advocacy and education
organization. “Will the rewards
or cash back outweigh the annual
fee? If not, don’t get it.”Q: I have one credit card,
and my sister has nearly
a dozen. Who’s smarter?Alas, we can’t predict Mensa
membership by counting cards.
There’s simply no ideal number
of credit cards. If your sister never
carries a balance or misses a
payment—and the rewards, dis-
counts, and deals she earns out-
weigh annual fees and the hassle
of managing multiple accounts—
then good for her. If you don’t
trust yourself with so much
plastic (imagining creeping debts
and late fees), you’re wise to keep
it minimal. But even so, you might
want to have at least two, says
Shannah Compton Game, a certi-
fied financial planner and the
host of Millennial Money Podcast.
That way, if the issuer of your
go-to card tweaks the terms or
unexpectedly lowers your credit
limit (yes, they can do that!), you
won’t feel stuck.Q: I’m applying for a
car loan, and my credit
is teetering between
good and great. Is there
anything I can do?If you have good credit, you will
likely be able to get a car loan—
though having great credit (above
740 points) can sometimes sweeten
the deal. Don’t bother using a
service that promises to instantly
boost your score, says Kimberly
Palmer, a personal finance expert
at NerdWallet. Credit scores take
time to build and are generally
based on your track record of
making payments. “Improving a
credit score typically happens
over months and years, not over-
night,” Palmer says.
You should definitely compare
the amount you owe with your
credit limit (a ratio known as
credit card utilization), Game says.
If it’s higher than 30 percent, pay
off as much as you can. If it’s still
too high, call the card company
and ask to up your limit. “It wid-
ens the gap between the amount
of credit available and the amount
you’ve used,” she says. This could
give your score a modest boost
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