1. The High Cost of Not Using Your Credit Cards . . .
You may be tempted to pack credit cards away to reduce the temptation to spend.
It’s not a bad idea — just don’t forget about them.
Credit card companies may close your accounts if you’re not using the cards for some time, and that can cause three big risks.
First, it may reduce your total credit limit. That, in turn, would increase your credit utilization ratio, which is 30% of your credit score.
Second, you may lose any accumulated points, which could be hundreds — perhaps thousands — of dollars.
Third, if it’s one of your older cards, it can reduce the average age of your credit history, which makes up 15% of your credit score. And if your credit score takes a significant drop, other issuers may increase your rates.
If that does happen to you, the Credit Card Act of 2009 says issuers must give you 45 days’ notice and can only make higher rates applicable to new purchases. But a way to avoid the problem is to keep your credit cards active, especially older ones, even if you only use them for automated monthly bills
2. Ditch Your Credit Card Fees . . .
If you have credit cards with annual fees, but decide keeping them isn’t worth it anymore because you aren’t using the perks, remember that the fees continue. Rather than canceling those cards, consider swapping them for no-fee versions from the same credit card issuer. Most card issuers will do a swap to a no-fee card without even changing your account number.
You get the benefit of keeping your credit history, but without the fees.
For example, the $95-a-year Capital One Savor card pays 4% cash back on dining and entertainment, while the no-fee version pays 3%. Paying $95 for the 1% differential means you’d have to spend $9,500 per year — which is $792 extra per month — just to break even on the fee.
If you’re not spending the money, don’t pay the fees.
3. Free Boost to Your Credit Score . . .
If your credit score has taken a recent hit, there may be an easy way to boost it.
Experian Boost is a free service from credit bureau Experian that lets you connect your on-time utility and phone bill payments and be factored into your credit score.
You connect your bank account, and Experian’s software identifies your on-time utility and phone bill payments. These are then factored into your credit score, but any late payments are ignored and won’t adversely affect it. Experian claims that 86% of consumers with a thin credit file saw an instant average increase of 19 points.
4. Be Careful With 0% Balance Transfers . . .
Many credit cards offer 0% interest for a limited time on balance transfers. Because so many people today are trying to pay down debt, taking advantage of these deals is becoming increasingly popular.
Before you transfer, however, be sure you understand the terms.
Most credit cards charge 3% to 5% balance transfer fees. At 5%, you’d pay $500 up front for a $10,000 transfer. And you’ll pay that fee regardless of how long you take to pay off the balance. If you pay it off in a relatively short time, it may be a losing deal. If the original card charged 18% per year, that’s 1.5%, or $150 per month. If you pay off the balance in three months, it would have been cheaper to stay with the original card at 18%.
Zero-percent balance transfers are therefore better if you can pay them off over longer periods of time.
However, be careful here, too.
Many of these cards only offer 0% for a year, then charge you a much higher rate — perhaps 20% to 30% — once the free offer is over. Before you transfer, be sure the math makes sense and that you can pay off the debt during the offer period.
5. Save Money with Dosh . . .
Dosh is a free cash-back app that links your credit or debit cards to Dosh’s online secure wallet where you can get automatic cash back when you shop.
And if you use a cash-back reward credit card to pay, you can double dip on savings!
Dosh has partnered with thousands of big-name retailers like Walmart, Sephora, Pizza Hut, Dunkin’ Donuts, GNC, and more. When you shop, dine, or book hotels, you’ll earn up to 10% cash back on your purchases. Once you’ve earned $25 cash, you can transfer the money to your bank, PayPal, or Venmo account or donate it to charity.
It doesn’t get any easier to save money.
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