Additional credit card research
How do you know what card to apply for? If you’re looking for any easy way to compare the best credit cards, check out our search tool below:
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When should I pay off my credit card bill?
Always strive to pay your credit card balance in full by your statement due date. There’s no better way to build a solid credit history and healthy credit score.
Credit is a powerful tool when seasoned with self control, but left unbridled, it can wreak havoc on your financial future. Case in point: The average American household has $16,000 of credit card debt. If your card has an 18% APR and you’re only making the minimum payment (usually around 3% of the total balance) you’ll rack up over $2,000 in interest charges every month and continue to lose ground.
Paying your credit card off in full also helps to keep your credit utilization ratio low. Your credit utilization ratio is the percentage of your available credit that you have used. Credit bureaus use this metric to gauge how responsible you are.
When it comes to credit utilization ratio, low is best. Credit cards can negatively affect your credit utilization if you continuously run large balances.
We recommend keeping your credit utilization for each credit card below 30%. You can track your credit utilization on your credit card with some simple math — (balance ÷ credit limit = ratio).
The exact date you pay your bill matters
Most card issuers report your balance and activity to the credit bureaus once per month. The problem is that the report might be issued before your monthly statement is due. So even if you pay your card in full each month, it will appear to credit bureaus that your utilization ratio is higher than it actually is.
If you’re committed to keeping your credit utilization ratio low, call your credit card helpline, ask when your credit activity is reported, and make sure to pay your balance before that date.
Can you ask for a lower rate on your credit card?
Yes, you can. In fact, a survey of 952 American cardholders found that 69% of people who asked their credit card issuer for a lower interest rate were successful. What’s equally as interesting is that only 25% of people ever take the time to try.
Your interest rate isn’t the only thing you can haggle over. Late payments, annual fees, and credit limits are fair game too. Of all the survey participants who asked:
- 87% got a late payment fee waiver
- 69% got a lower interest rate
- 89% got a higher credit limit
- 82% had their annual fee waived or reduced
Here’s how to lower your interest rate
Negotiating better rates doesn’t have to be scary. Follow these three primary tactics to improve your chance of success:
- Leverage your loyalty. It’s simple: Companies are more willing to work with longtime customers. Your best play is with the company you’ve been doing business with the longest.
- Do your homework. Find a better deal and use it to your advantage. Credit card companies need your business. Remember: Over half of the people in the survey scored a better rate simply because they called and asked.
- Be persistent. You probably shouldn’t call day after day, but there’s nothing wrong with a little persistence. If at first you’re told “no,” ask to speak to a manager.
Is it better to have a zero balance on a credit card or close it?
It’s not always best to close credit card accounts with a zero balance. Before you take action, consider that closing your account might have an impact on your credit score
How credit utilization affects your credit score
There are five factors that influence your credit score: payment history, age, mix of credit, inquiries, and your credit utilization — which can impact up to 30% of your score. Credit utilization (sometimes referred to as your credit utilization ratio) represents the percentage of your available credit that is currently active.
Imagine you have two credit cards with a total credit limit of $20,000; one with a $5,000 limit and another with a $15,000 limit. On the first card, you have a $3,200 balance, and on the second you have a $0 balance because you just paid it off.
Right now, your credit utilization is at a healthy 16%. If you cancel the second card, your total credit limit will drop to $5,000 and your credit utilization will rise to a whopping 64%. That’s important, because experts say that once your utilization ratio exceeds 30% your credit score may be at risk.
Should I close my card?
It all boils down to how comfortable you are weathering a drop in your credit score. Canceling a card won’t necessarily sabotage your credit report, but we recommend avoiding any scenario that puts your credit at risk before applying for a mortgage, car loan, or apartment. Otherwise, you might not score the best interest rate possible.
Which credit card is best for first-time users?
If you’re new to credit, you might not have enough of a credit history to qualify for some of the best credit cards available. That’s where secured credit cards come into play.
Unlike unsecured credit cards (regular credit cards), secured cards require a down payment. That makes them less risky for lenders, and easier to apply for. Here are a couple of the best secured credit cards for building or repairing your credit history:
Best for low fees – Capital One® Secured Mastercard®The Capital One® Secured Mastercard® has a minimum security deposit of as little as $49. And if you use your card responsibly for the first five months, you might qualify for a credit limit upgrade with no additional deposit.
Best for military members and their families – USAA® Secured Visa Platinum® Card
The USAA® Secured Visa Platinum® Card offers military members and their families an incredibly low APR on all balances for up to 12 months during deployment and PCS with no foreign transactions fees. Plus, your security deposit will earn interest as a two-year CD (certificate of deposit).
How long does it take to rebuild your credit history?
There is no quick fix for improving a bad credit score — it usually takes a year or two at minimum. The length of time it takes to rebuild your credit history depends on the negative information on your report.
Hard inquiries have the most minimal effect on your credit report and remain on your credit report for only two years. On the other hand, delinquencies (the number of times you’ve fallen behind on credit card payments) can remain on your credit report for up to seven years. Some public record items, like bankruptcy, can impact your report for a whopping 10 years
Can credit cards get wet and still work?
Accidents happen and you may have wondered if your credit card will still work after it gets wet. If you have dropped your credit card in some water or jumped into a pool with it in your pocket, you’re in luck. In most cases, you should be able to dry off the credit card by wiping it off with a towel. However, if you have put your credit card through the washer and/or dryer, there may be complications from it getting bent or creased.
Can credit cards be recycled?
Perhaps you’ve cut up an old credit card and wondered if the plastic could be recycled. Most credit cards are comprised of PVC (number 3 plastic), which is often considered a recycling plastic. However, there are other factors that can complicate the recycling process. Contamination problems from embedded chips and holograms may throw a wrench into the situation. However, we must also stress the importance of protecting your identity. In this case, it might just be better to cut up your card and dispose of it properly.
The Simple Dollar’s best credit cards:
- Capital One® Venture® Rewards Credit Card
- Chase Sapphire Preferred® Card
- Discover it® Cash Back
- Discover it® Balance Transfer
- Blue Cash Preferred® Card from American Express
- Blue Cash Everyday® Card from American Express