The Only Credit Card Guide You’ll Ever Need

I don't like credit cards. They're a dangerous trap, especially for the young. Many smart people disagree with me, though, and have learned to use credit cards to their advantage. This guide provides solid credit card information so that you can make smart choices.

I've structured this as a series of questions and answers. There's sure to be a lot missing. Please let me know what else should be included here, and I'll add it. Let's start with the big question:

Where can I find the best credit card deals?
Index Credit Cards is a comprehensive credit card resource. The site features daily credit card news, but the main attraction is its list of credit cards, which catalogs over 2,000 credit cards including sublists of cards by:

Low-interest credit cards

  • Ongoing low-APR cards
  • 0% introductory offer cards
  • 0% balance transfer cards

Reward credit cards

  • Cash-back cards
  • Cards with rewards
  • Travel and airline cards
  • Gas cards
  • Secured credit cards
  • Unsecured credit cards

The credit card offers also feature lists of business cards, student cards, cards for people with bad credit, prepaid cards, and more.

I'm willing to promote the site because it doesn't wantonly advocate credit card use. It provides a service for those who choose to use them. It also cautions strongly against credit card abuse. There are articles about reading credit card fine print, a warning about transferring balances, understanding the credit card application and more.

I don't think you should use credit cards. But if you choose to do so, bookmark Index Credit Cards.

Update: Here's a post at Smart Money about the best cards for college students.

What should I be wary of when getting a credit card?
If you think you might need a new credit card, be sure to read Nine Things to Consider When Choosing a Credit Card. This short checklist is an excellent way to make sure you don't forget something important that can come back to burn you later. Also be wary of stupid credit card tricks.

What do all of these terms mean? I can't understand the application.
Credit card applications are full of legalese. Even the ads can be confusing. If you're drowning in the jargon, this glossary of credit terms may prove useful.

Is it safe to pay bills with a credit card?
It is, but there are small “gotchas” you should watch for. Many companies charge a processing fee if you use a credit card. (And the IRS charges such a fee if you use a card to pay taxes.) For more information, read about the potential downsides to using a credit card to pay monthly bills.

How do I cancel a credit card?
Here's a summary on how to cancel a credit card. The short version: Do not cancel a card unless it has a zero balance. Call the credit card company. Some will let you cancel without hassle, but most will attempt to sweet-talk you into staying longer. If you intend to keep one or more cards, and if the offered upgrades make the card you're trying to cancel better than one you plan to keep, you may want to cancel another card instead. Write down the name of the person you talked to and what time you talked with them. Simple.

How can I get a late fee waived?
Call your credit card company. Politely ask them to waive the fee. If you don't have a history of trouble, they should honor the request. If they don't, then threaten to cancel the card. Be polite but firm.

How do I stop credit card offers from coming in the mail?
Use optoutprescreen.com, a site that lets you opt out of credit card offers for either five years or forever. I was worried that this was some sort of scam, but it's not — the Federal Trade Commission endorses its use.

How many credit cards to people carry?
There are no consistent answers, though most sources say “between five and ten” (which is far too vague for my tastes). Read more about how many credit cards people carry in an earlier entry.

How can I play the credit card arbitrage game?
Several personal finance bloggers I respect game the system, using 0% credit card rates to carry high balances and actually make money. This seems an invitation to disaster, but if you feel you have the discipline to pull it off, check out FiveCentNickel's example of credit card arbitrage.

How can I get a FREE copy of my credit report?
A recent federal law gives consumers free access to their credit reports. (It costs extra to obtain your credit score.) The only site you need to know about is AnnualCreditReport.com. This is an official, government-approved site.

How do I dispute credit report errors?
The Federal Trade Commission offers a guide to disputing credit report errors. It's really just a three-step process:

  1. Obtain a copy of your credit report. (See the previous question.)
  2. If you find errors, notify the credit reporting company in writing.
  3. Notify the appropriate creditor in writing.

For more information, read the entire government publication.

How does a credit score work?
Your credit score is based on your payment history, the amount you currently owe, the length of your credit history, the types of credit you use, and your recent request for credit. For more information, check out my anatomy of a credit score.

How can I improve my credit score?
Here are some tips on improving your FICO score. Basically you should pay your bills on time, keep your card balances low, refrain from opening a lot of new accounts at once, and maintain long-term relationships with creditors. A high credit score is not as important as staying out of debt.

I have a lot of credit card debt — how do I pay it off?
Don't listen to anyone who tells you there's only one way. There are a number of approaches, and the important thing is to pick the one that works for you. I've written about two popular approaches to debt elimination. Pick the one that works best for your personal psychology.

Where can I find more information on credit and credit cards?
As I mentioned earlier, Index Credit Cards is a fantastic resource. Several people have told me that the credit talk forum at CardRatings is also excellent.

More to come!
Now I need your help — if you know of other resources that should be listed here, let me know. I'll add them as they're submitted.

More about...Credit

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makingitbig
makingitbig
13 years ago

Thanks for the great post! I’ve just started looking for a business credit card and I’m hoping that one of these links pans out.

frugal
frugal
13 years ago

This is a great post! Definitely the only credit guide that you will ever need. I will digg you twice if I could. Let me go ahead and digg it now.

Ryan Mcp.
Ryan Mcp.
13 years ago

I would suggest on-line payment. Now this is a far cry from my grandfather(who only carries cash), but transfer money on-line. As a college computer science major I suggest that payments be on-line. A.)There are plenty of records that you can get both on statements and on-line that say the payment was made. Making it easier to keep track of your transactions. Also, B.) transactions are kept up to date. In this marvelous time of technology it only takes a few min. if that to post any sort of transaction on-line. One warning I do have is to keep your… Read more »

Filip
Filip
13 years ago

I don’t understand why people just don’t use their visa/mastercard facility on their “credit” card as a “debit” card. Like all accounts, your cc acount begins at $0 and there’s nothing stopping you from saving up cash and “crediting” the account with some real money and keeping the balance at that amount. ie. if you choose a “credit” limit (really a debt limit) of -$2000, just save up that amount of money, credit the account with +$2k and then make that your “$0”. I know you won’t earn any interest but seeing as you’re always in the positive it should… Read more »

Emily H.
Emily H.
13 years ago

I don’t even think it needs to be that complicated; I just keep track of the balance in my checking account, and don’t buy anything on a credit card unless the money’s already in my checking account. I check my CC balance online and usually pay it off 2-3 times per month, depending on how often I make purchases.

This works for me because I don’t use credit cards more than occasionally, I admit. And I can only hope that it continues working now that I got a high-interest CC because it had good rewards!

fivecentnickel.com
fivecentnickel.com
13 years ago

Any chance you’re being compensated (perhaps by Index Credit Cards) for this post? Just curious.

J.D.
J.D.
13 years ago

Good question, Nickel. I am not being compensated for this post. Despite my anti-credit card stance, I get a lot of questions about which credit cards people should use, and how they should use them. These are questions I cannot answer (I don’t use credit cards), so I’d rather direct people to sites that can better help. This post is a compilation of the best credit- and credit card-related information Get Rich Slowly has published over its first four months. It’s all good stuff. It’s true that Index Credit Cards is sponsoring a promotion for bloggers right now, and that… Read more »

The DEBTective
The DEBTective
13 years ago

The best credit card is no credit card, babe.

David
David
13 years ago

When searching for the best credit card, keep in mind that issuers can change a card’s terms and rewards in a matter of weeks. Be sure to contact the issuer to verify the specifics.

Joel
Joel
13 years ago

Your Guide would be complete with one more thing. I built a tool to make cash back analysis and decision much easier. Given your spending in various categories (gas, restaurant, utilities, etc.), the tool calculates the expected cash back reward for the leading cash back cards and also for the best 2-card combination, 3-card combination, etc. for your spending profile. I made the tool available for free at
Credit Card Tune-Up: Maximize Your Cash Back Rewards (www.CreditCardTuneUp.com).

Credit Card Arbitrage
Credit Card Arbitrage
12 years ago

Great article JD but I’d have to strongly disagree with you that credit card arbitrage is an “invitation to disaster”. As long as you’re competent enough to pay bills on time and savvy enough not to blow the money, arbitrage is a _great_ way to get free money from credit card companies. There are people out there that are making five figures from doing this.

Maggie
Maggie
12 years ago

Thanks a lot, I’ve made some discoveries! For example, I didn’t know than now one can look through his credit report whenever he wants, paying for credit score only. That’s great news for me!)))

Find Credit Score
Find Credit Score
9 years ago

I’ve been wanting to stop all those credit card offers coming in the mail. I didn’t even know about optoutprescreen. I’m going to give that a try and hope it stops these companies from flooding my mailbox with cc offers that I’m not interested in. Thanks for the article.

Betty
Betty
8 years ago

Just an aside – when I was using only a debit card I found that the only car rental that would give me a car was Budget. The others required a credit card.
I currently have a debit and a credit card and pay off the balance every month.

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