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:
- Obtain a copy of your credit report. (See the previous question.)
- If you find errors, notify the credit reporting company in writing.
- 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.