It seems the more I discuss travel and credit cards with folks the more I hear how a lot of people are scared of credit cards. There are a ton of myths that get passed around about signing up for credit cards and how to maintain your cards. I am going to touch on some of the reasons you are likely scared of credit cards and hopefully encourage you to responsibly pursue them. To be clear, the biggest travel deals come from signing up for new credit cards, I will try to help you find a happy medium between too much and too little.
1. I am scared I won’t be approved. That is a completely normal fear. I have the same fear every time I click ‘submit’ on a credit application. One of the best ways to “make sure” you are likely to be approved is to check the score requirement of the credit card. Creditcards.com offers a card matching tool that will show you cards that you are “matched” with based on the information they know about you. You aren’t guaranteed to be approved for the cards they display but there is a good chance you will be approved if your credit and income have been on the rise. Check your score for free here. If you have 620 or below there are not many reward cards available, unfortunately. Your best bet would be to get a secured credit card like this one, to start building your credit history. (you can do it!)
2. I don’t want a credit pull on my report. This too is a valid fear. Nobody wants credit inquiries on their credit reports, however, they are a necessary evil. A typical credit pull will drop your score 2-3 points. The idea behind this is the credit companies are trying to discourage you from shotgunning your credit to everyone. These inquires begin to loose their weight after a few months. After two years, they fall off your report altogether. Getting one credit card every 3 months is not abnormal. Just make sure you are able to manage them responsibly otherwise you could do more harm than good.
3. I am scared I will miss a payment and be charged a fee. Let’s get one thing clear, credit card companies like to charge you fees, but they can definitely be avoided. I have never paid an unforeseen fee in the 5+ years that I have had credit cards. I did get close once when I used to travel for work a few years back, I had to call and make a phone payment before midnight. That leads me to my next point, we are all busy. The first thing I do when I get a new credit card now is turn on automatic payments. You should always do this as a fail safe to save yourself from fees and a ding on your credit score if you forget to make your payment. I set all my cards to pay the “total new balance”. That means it will pay off any new charges for that statement. If you do this from the beginning you will never carry a balance and pay NO INTEREST. If you are going to take the credit card/travel game seriously you cannot pay interest charges, they will quickly negate any sign up bonuses you earn.
4. I am scared I will get myself in trouble with spending. If you deeply feel this way, by all means, don’t pursue credit cards at this time. There is no need to get yourself in financial trouble trying to chase $400 in free flights. That is not worth it in the long run. One point that I made earlier, about automatically paying your new charges in full every month, may help you mentally ‘control’ your spending. If you know that every charge you put on your credit card is automatically going to be paid out of your bank account at the end of the month it may help control your spending. Again, an easy rule to remember is, don’t spend money on something you normally wouldn’t be able to afford with cash or a debit card. Just because you can doesn’t mean you should. One last thing, don’t use the minimum spend requirement as an excuse to spend money frivolously. If you need help meeting your spend, you can pay bills (even pay them in advance like I do) using plastiq.com. I pay my car insurance 6 months in advance, I am always going to need it, plus it saves me a $5 a month. You can pay your rent or mortgage a few months in advance, your bank/landlord won’t mind, trust me…
5. I heard that opening credit cards can hurt your credit score. As in life, all things in moderation. If you open up one new credit card every 3 months you will be fine. Just make sure to pay off your balances every month and you should see a rise in your credit score as your available credit increases. One thing I see happen a lot is people wait until they are ready to fly to start pursing a credit card. If you have the itch to travel (I itch a lot, so I know how it feels) you should start building your ‘point’ balances now. If you wait until you are close to departure you may not be able to find a seat or the amount of points required will increase, all bad. If you want to get a credit card to cover your Christmas travel, start NOW! It will take 7-10 to get the card, 4-8 weeks (roughly) to meet your minimum spend, and then up to 30 more days for the points to deposit in your account. Then you have to deal with holiday flight availability on top of all those aforementioned delays. Again, start early, it never hurts to have points sitting, who knows when a deal might pop up.
6. I don’t know how I will be able to spend $2,000 in 90 days. This is something I hear about quite often. Minimum spends, which will vary, can be tough if you are used to paying for things with cash or debit. I kid you not, I have gone a full three weeks without having my debit card or a single dollar bill in my wallet. I find it very easy to use a credit card in most day-to-day transactions. Like I mentioned early, if you don’t have a lot of things to use your credit card on (that is not necessarily a bad thing!), you can use plastiq.com to pay almost any bill you can imagine. They will charge your credit card and mail a check to any business or individual on your behalf. As a last resort, you can always send money to a friend or family member and have them pay you back once they cash the check they received from plastiq. You could also walk into your grocery store and buy a $500 pin enabled gift card ($6 fee) and then just use that $500 in the next month or so like a debit card. But the awesome part is, since you bought the debit gift card with your credit card, the $500 appears on your credit card statement right away. Heck, you could take the $500 debit gift card and go buy a money order and cash that baby to pay your credit card off. The circle of life as I see it. (life being free travel)