Insider’s experts pick the best products and services to help you make smart decisions with your money (here’s how). In some cases, we receive commissions from our affiliates, however, our opinions are our own. Terms apply to the services listed on this page.
- I’ve always limited myself to one credit card because I’m afraid of going into debt and lowering my credit score.
- To clear up the confusion, I asked a credit card question that many people are afraid to ask.
- They explain how credit card interest works, if a cash advance is worth it, and what happens if you carry a balance.
- Read our Insider’s guide to the best rewards credit cards.
Whenever I go out with friends and we pay the bill for dinner or drinks, the subject of credit cards usually comes up. As we put our cards on the table, everyone shares their opinion of what is best and what benefits it.
As someone who is afraid of taking on credit card debt or doing anything to lower my credit score, I tend to store their suggestions in the back of my mind and continue to live my life single credit card.
Credit cards available from Insider
Earn 5% cashback on daily purchases at various places every quarter like Amazon.com, grocery stores, restaurants and gas stations until the end of the most recent quarter when you move. Get unlimited 1% cash back on all other purchases.
Unlimited Cashback Matches – Discover will automatically match all your cashback at the end of the first year
Earn 2% on every purchase with an unlimited 1% cashback when you make purchases, plus an additional 1% when you pay for those purchases.
Get 5% cash back on up to $1,500 in combined purchases in your bonus category every quarter. 5% back on travel purchased with Chase Ultimate Rewards®. Get 3% cash back on grocery and restaurant purchases, including eligible grocery and delivery services, and 1% unlimited cash back on all other purchases.
$200 after spending $500 on purchases within the first three months of account opening
But I always wonder if I’m really financially savvy enough to limit my credit card access. The truth is, I have so many financial questions that I’m embarrassed, because I feel that at 34 years old, I should know the answers to most of them.
To make sure I didn’t make any financial mistakes, I sat down with a financial advisor and asked them the most common credit card questions. Their answers cleared up my doubts and confusion about things I had never known before. This is what they said.
We focus here on the rewards and benefits of each card. These cards are not worth it if you pay interest or late. When you use a credit card, it’s important to pay your monthly balance in full, pay on time, and only pay what you can afford.
How many credit cards should you have?
Most of my friends have more credit cards than they can count on one hand. I only have one. This made me wonder how many credit cards a person should have.
Certified financial analyst Andrew Rosen says the answer depends on how responsible you are with your credit card and your personal financial situation.
“As a financial advisor, I have four credit cards and I treat them like a credit card, meaning I pay the day I use them,” Rosen said.
If you’re going to go this route, it might be a good idea to make sure that these credit cards benefit you in different ways. Rosen said she has one card for cash, another for travel destinations, one for Amazon purchases, and another specific to the airlines she uses most often.
Do I need to carry a balance to get credit?
In a conversation with a friend, I remember him sharing a monthly credit card management strategy to improve his score. As someone who pays their bills as soon as possible, I wondered if I lowered my credit score by doing so.
The answer is no.
Certified financial planner Jason Noble says this route won’t help you build debt, and you could end up spending money on interest payments.
Noble says it can also lower your score, and that’s because payment history accounts for 35% of your credit score and the amount you owe 30%.
“Payment history examines whether you’ve paid your bills on time and made regular payments, while debt balance shows how much you owe,” Noble said.
This is why carrying a balance can turn out to be counterproductive in terms of building your credit score.
Should I take advantage of credit card payments?
Featured APR Credit Cards on Insider
0% intro APR on balance transfers for 18 months and on purchases for 6 months
14.99% – 25.99% Variable
0% intro APR on balance transfers for 21 months (transfers must be completed within 4 months of account opening) and on purchases for 12 months
16.74% – 27.49% Variable
0% intro APR on purchases and balance transfers for the first 15 months
17.99% – 26.74% Variable
Earlier this year I needed a lot of money to pay for an unexpected and expensive purchase I had to make. When I was researching ways to get access to cash fast, I found a credit card cash advance option, which allows you to withdraw money from your credit card account, but without any fees. I didn’t do it and borrowed money from a friend, but I wondered if, in the future, it would be a good idea.
Noble says you generally shouldn’t take advantage of cash advances because of the higher interest rates associated with this type of transaction.
“Personal credit cards may offer low APRs or 0% on cash advances, but read the fine print because there’s often a deadline in which the balance must be paid off or you’ll end up with high interest rates,” says Noble. .
When you need cash fast and are thinking about taking out a credit card, Noble says, remember that no credit card will give you free cash for a long period of time.
“They’re in business to get a fee from the business and an interest rate from the customer,” Noble said.
How does the credit card APR work?
I recently decided to shop around for a second credit card and I’m seeing a lot of 0% APR offers, which after a certain period, go up to 18-20% APR. While I understand that APR stands for Annual Rate and how much interest you pay on the amount you borrow for credit card purchases, I was wondering if there was anything else I should know about APRs.
Noble says the APR will come into play when you don’t pay the full amount of your statement. For example, if you have a $3,000 balance on a credit card with an APR of 18%, that month you will be charged around 1.5% interest (the APR divided by the number of months in of the year) which is $45.
“Please remember that $45 will now be added to the new balance and will be subject to interest charges in the future,” Noble said. “If you didn’t pay the balance and owe $3,045 next month, the interest would be $45.67.”
How can I benefit from making credit card transfers?
A few of my friends recently got into credit card debt and took out a new credit card loan. Although I have never done this, I would like to know the benefits of this strategy.
Noble says that if you find a credit card that offers 0% on balance transfers, you can transfer money from one high-APR credit card to another credit card that offers 0% on that balance for limited time.
While this may seem like a good choice, Noble says many credit cards have balance transfer fees, even 0% introductory offers, and that may influence your decision. that fee if they are high.
“If you go down that route, make a plan to pay off the balance in full before the end of that period to save on interest charges,” says Noble.