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Best way to use cards

Herb8108
Established Member

Best way to use cards

I'm still new in the rebuilding phase my Experian score is 620 transunion is 533 equifax is 531 according to CK. I have a few cards Capital One QS 850 credit limit, 657 balance on it, Next card is Capital One Platinum Secured 500 limit, I have a 427 Balance on that, Next Card is Discover It 700 limit, my balance on that is 597, Next Card Credit One Amex it's fairly new my limit is 600, I have a zero balance on that, I am an Authorized User on my cousins BOA card with a 13,600 limit and they have a 1500 balance on that. 

So my question is once I pay all my balances down to zero which I am working on that now how would I use those cards to maximize all the benefits in terms of getting the most cash back from the quicksilver and the discover it as well as the credit one. I'm trying to show responsible payment history while trying to rebuild my reputation with capital one. I'm trying to get like most of you guys who are in the 700s across all scores 

More Life, More Credit, More Power
10 REPLIES 10
ImTheDevil
Community Leader
Super Contributor

Re: Best way to use cards

I'd use Disco for all of the 5% cash back spending, and the rest on the QS. Leave the others at zero except for a small purchase (like a coke) every couple months. They aren't worth bothering with as they don't offer rewards. 

For the two you use, each month use them all you like, but pay off one completely before the statement date, so it reports zero, and the other, pay down to $10, let that report, then pay it off once the statement cuts. This way you avoid interest, preserve your grace period, and still benefit from cash back.

 

One possible variation - if Credit One charges a monthly fee, let that be the one that reports that fee balance each month, and pay Disco and QS to zero.



Platinum NPSL | Rose Gold NPSL | BCP | Delta Gold | Hilton Surpass | Hilton Honors | FNBO Prime Visa | PenFed PCR | Navy cashRewards | Navy Platinum | Apple | IT Cash | IT Chrome | GHSFCU Visa Plat | Quicksilver | Target | VS | Home Depot | Lowes | Sams MC | Firestone | Overstock | Kohl’s | Key Bank auto loan (2017 Audi A6 Premium Plus S-Line)





Message 2 of 11
FormerCollegeDJ
Regular Contributor

Re: Best way to use cards

In terms of cash back, as you noted you'll want to focus your spending on the Capital One Quicksilver and Discover It cards.

 

Regarding showing card issuers you can be fiscally responsible, I'd say there are two things you can do:

 

1) You can pay off your cards more frequently than once per month; you'd pay off a card shortly after specific charges post to the card.  Doing that would help you avoid overspending because you'd be drawing down from your checking account to pay off the cards more often.  It would also help you have lower posted utilization percentages; the banks/credit cards typically only report/formally check utilization once per month, and lower utilization rates, particularly below 30% on each individual card and across all of your cards combined helps boost your credit score.  It would also force you to do #2 below.

 

2) Make sure you don't spend beyond your means; budget your income and spending.  I've long personally thought credit cards function as 30 day loans, which can be helpful if you have steady income and know you'll have a certain amount of money available at certain times to pay off the card.  However, if you can't pay the loan off by its due date, it ends up being counterproductive because the interest more than offsets the benefit of being able to purchase desired items (as well as more than offsetting any rewards you earn from cards; the 15% or 20% APR is a lot higher than 1.5% or even 5% rewards rate).  You can sit down and examine your regular, recurring monthly expenses (i.e. housing, car/transportation, food, utilities, etc.) and figure out how much they are relative to your income.  Whatever income you have left over after you pay off those required expenses becomes the maximum amount you can spend on a card per month.  DON'T SPEND BEYOND THAT AMOUNT.  Ideally, you spend at least a little less than your remaining income so you can build up your savings, preferably in something (or somethings, plural) like a 401k, mutual funds, stocks, or at a minimum an interest bearing bank/credit union savings account.  If you are tight on funds and there is regular, discretionary spending that is not required, say like cable TV/streaming services, look at ways to reduce or eliminate that discretionary spending that you feel comfortable with but also allow you to live within your means.

 

You are already taking the right steps in that you've set an appropriate first goal of paying down the balances on your existing cards.  However, you need to make sure you are paying more, preferably considerably more, than the minimum required monthly payment to effectively do that.  If that's a challenge for you, one thing you can try to do is to apply for (and hopefully be approved for) a credit card that has a long intro period 0% APR on balance transfers and transfer the balances from your other cards to that card.  You won't have to worry about interest on the spending that has already occurred (i.e. the existing credit card balances), but you'll still want to budget to fully pay off that credit card debt during the 0% APR period.  That can be done by treating those existing credit card balances as a regular, recurring monthly expense that you add to your list of monthly expenses.  Using your numbers above, you have $1681 in credit card balances ($657 + $427 + $597).  If you had that amount on a card with 0% APR for say 15 months on balance transfers, you'd have 15 months to pay off the full $1681.  You'd divide the $1681 by 15, which is approximately $112/month, and that $112/month would become one of your regular, recurring monthly expenses in addition to housing, car/transportation, food, etc. that you'd need to budget.  Ideally, you'd pay more than $112/month towards the credit card debt to give yourself financial leeway for unexpected expenses.

 

Even if you can't get a credit card with a long 0% intro APR for balance transfers term, you can still address your credit card debt in the way described above and budget a set amount of money considerably more than the minimum monthly payment (and preferably more than $112/month) as a regular, recurring monthly expense to pay off the existing cards.  (That amount should be treated separately than any new credit card spending BTW; the credit card debt balance is a mandatory, recurring monthly expense while any new spending is a discretionary expense.)  If you need to do that, focus initially to a greater degree on paying down the debt on the cards that have the highest current APR that will add the most interest to your credit card debt balance.

 

Good luck as you work to pay off your credit card debt and improve your credit scores.

Playing the credit card rewards game since early May 2020.

Current credit cards:
*Discover Cash It, 10/5/94, $10,000 CL
*American Express Hilton Honors, 9/23/96, $16,500 CL
*Kohl's store card, 7/31/00, $2500 CL
*Chase Amazon Rewards Visa, 10/29/06, $7000 CL
*Citi Sears/Thank You Rewards Mastercard, 9/19/09, $2001 CL (LOL)
*Citi My Best Buy Visa, 12/29/11, $4600 CL
*Bank of America Amtrak Guest Rewards Platinum Mastercard, 10/17/15, $15,000 CL
*Bank of America AAA Member Rewards Visa, 3/9/17, $15,000 CL
*Chase Freedom Unlimited Visa, 6/29/20, $11,000 CL
*Chase Freedom Flex Mastercard, 11/9/20, $9900 CL
*Capital One SavorOne Mastercard, 3/30/21, $10,000 CL
*Wells Fargo Propel American Express, 4/11/21, $10,000 CL

Next target credit cards:
*US Bank Cash+ Visa
*Wells Fargo Active Cash Visa, PSECU Founder's Card Visa, or Chase Sapphire Preferred Visa
*Citi Custom Cash Mastercard
*Elan Financial Services Max Cash Preferred (S&T Bank Visa version)
Message 3 of 11
Herb8108
Established Member

Re: Best way to use cards

Thanks for the info I haven’t really used the credit one yet I charged a Big Mac meal from McDonald's on it and left it at that and that's the only transaction I see on there so I don't think there are any monthly fees but I could be wrong. I will watch that and once I get my QS1 and Discover it cards to zero  I will use those for the rewards 

More Life, More Credit, More Power
Message 4 of 11
Herb8108
Established Member

Re: Best way to use cards

I've been paying a little more than the minimum on my cards so within the next 2/3 weeks I should have everything down to a zero balance, That way I can start to maximize the benefits off the cards thanks for all the advice it was great I was looking at your cards and limits what did you start off with and how did you end up where you are right now if you don't mind me asking

More Life, More Credit, More Power
Message 5 of 11
FormerCollegeDJ
Regular Contributor

Re: Best way to use cards


@Herb8108 wrote:

I've been paying a little more than the minimum on my cards so within the next 2/3 weeks I should have everything down to a zero balance, That way I can start to maximize the benefits off the cards thanks for all the advice it was great I was looking at your cards and limits what did you start off with and how did you end up where you are right now if you don't mind me asking


Based on your balances, you probably want to pay off more than a "little more than the minimum" because the APRs on the cards will add significant fees to the balances unless much of your payment is dedicated to the "principal" rather than the "interest" (with the principal being the existing, unpaid credit card balances and the interest being whatever fees are added based on the balances and the APR).  You should probably find out what your APRs are on each of your cards with balances ASAP; you can find that information by looking at your cards' most recent billing statement (looking specifically for the APR associated with purchases).

 

As for how I started out, it happened so long ago (mid-1990s) I don't remember the details, LOL.  What I do remember is that I applied for probably 3-4 no annual fee cards during my late college years (probably 1994-1995); back then credit card companies would sometimes show up on campus and give you an opportunity to sign up for cards.  I know Discover, MBNA, PNC, and GM Card from a credit issuer I can't recall were among the cards; I also remember being a little excited when I received a mailer in my post-college/pre-graduate school period from American Express, which had more cache back then, to sign up for one of their cards (I believe the Optima card).  IIRC most of my cards had initial credit limits in the $500 to $2000 range; one thing I clearly remember is the PNC Bank card I had back then had a $500 CL, lower than my other cards, so I rarely used that card because I didn't want to spend anywhere near the credit limit.  My parents always emphasized not carrying balances on cards, so for a while after I got the cards I still primarily used personal checks or cash to buy many items (back in the days when using checks to buy goods was a lot more common; most retailers back then accepted checks).

 

Once I started living on my own in graduate school in the late 1990s and needed to use credit cards more, I generally paid most of my recurring expenses, like rent, phone bills, and utilities, by check (and much of my other regular, small spend, like restaurant spending, by cash) and largely only put discretionary spending on my credit cards.  As I recommended in my advice in my earlier post, I only spent within my (destitute graduate student) budget on the credit cards, so I had fairly low total monthly payments (maybe $200 to $300 per month).  That amount went up once I got a real job, but my required expenses went up too.  (For example, I didn't have a car in graduate school.)  There are only a couple times (both during the early to mid-2000s) I remember carrying any balance on a credit card where I could only pay off part of the monthly balance in a given month and had to then pay some interest; I made sure when that happened I closely monitored my spending the following month so I could pay off the full balance the next month (which I always did).  Being someone who always paid on time* and in full allowed me to build my credit score, which for many years (until electronic credit card payments became common) I never monitored, but eventually gave me the low 800s FICO scores I have today and as I've gotten interested in credit card rewards over the last year be able to apply for the good no annual fee rewards cards I wanted and obtain my desired credit limits on those cards.  ($10,000 CL is generally my target; I don't really need more than that but also don't want less than about $7000.)

 

*There were a couple times back in the 2000s I inadvertently forgot to pay the statement balance by the due date, which incurred that nasty $30-40 late payment fee.  However when that did happen, I always paid 1-2 days after the due date, and subsequently never got dinged on my credit score.  There's a difference to credit card issuers between missing the payment due date by a short period of time (30 days or less) and being delinquent on a payment (late by more than 30 days).  The former does not count as a "true" late payment that goes on your credit report; even the credit card issuers realize sometimes people make mistakes or temporarily forget to make a payment by the due date.  If you are slightly late, they'll collect their late payment fees but then not take further action.  When they get concerned is when you are significantly late and/or chronically late with payments; that's a much more significant issue.

Playing the credit card rewards game since early May 2020.

Current credit cards:
*Discover Cash It, 10/5/94, $10,000 CL
*American Express Hilton Honors, 9/23/96, $16,500 CL
*Kohl's store card, 7/31/00, $2500 CL
*Chase Amazon Rewards Visa, 10/29/06, $7000 CL
*Citi Sears/Thank You Rewards Mastercard, 9/19/09, $2001 CL (LOL)
*Citi My Best Buy Visa, 12/29/11, $4600 CL
*Bank of America Amtrak Guest Rewards Platinum Mastercard, 10/17/15, $15,000 CL
*Bank of America AAA Member Rewards Visa, 3/9/17, $15,000 CL
*Chase Freedom Unlimited Visa, 6/29/20, $11,000 CL
*Chase Freedom Flex Mastercard, 11/9/20, $9900 CL
*Capital One SavorOne Mastercard, 3/30/21, $10,000 CL
*Wells Fargo Propel American Express, 4/11/21, $10,000 CL

Next target credit cards:
*US Bank Cash+ Visa
*Wells Fargo Active Cash Visa, PSECU Founder's Card Visa, or Chase Sapphire Preferred Visa
*Citi Custom Cash Mastercard
*Elan Financial Services Max Cash Preferred (S&T Bank Visa version)
Message 6 of 11
ImTheDevil
Community Leader
Super Contributor

Re: Best way to use cards

^^^ well stated. I'll add only that there is still a risk to being less than 30 days late. While nothing will be reported to the bureaus, it will still be an internal black eye with that lender. Often they'll raise you to a higher penalty APR and many will not entertain CLI requests for a couple of years after such an occurrence. In the case of an Amex charge card, they may revoke the NPSL designation and impose a hard limit on the card which may or may not be rescinded in the future.



Platinum NPSL | Rose Gold NPSL | BCP | Delta Gold | Hilton Surpass | Hilton Honors | FNBO Prime Visa | PenFed PCR | Navy cashRewards | Navy Platinum | Apple | IT Cash | IT Chrome | GHSFCU Visa Plat | Quicksilver | Target | VS | Home Depot | Lowes | Sams MC | Firestone | Overstock | Kohl’s | Key Bank auto loan (2017 Audi A6 Premium Plus S-Line)





Message 7 of 11
FormerCollegeDJ
Regular Contributor

Re: Best way to use cards


@ImTheDevil wrote:

^^^ well stated. I'll add only that there is still a risk to being less than 30 days late. While nothing will be reported to the bureaus, it will still be an internal black eye with that lender. Often they'll raise you to a higher penalty APR and many will not entertain CLI requests for a couple of years after such an occurrence. In the case of an Amex charge card, they may revoke the NPSL designation and impose a hard limit on the card which may or may not be rescinded in the future.


Good point.  This is further reason to pay off your credit cards in full each month; if you do, the APR doesn't come into play.

Playing the credit card rewards game since early May 2020.

Current credit cards:
*Discover Cash It, 10/5/94, $10,000 CL
*American Express Hilton Honors, 9/23/96, $16,500 CL
*Kohl's store card, 7/31/00, $2500 CL
*Chase Amazon Rewards Visa, 10/29/06, $7000 CL
*Citi Sears/Thank You Rewards Mastercard, 9/19/09, $2001 CL (LOL)
*Citi My Best Buy Visa, 12/29/11, $4600 CL
*Bank of America Amtrak Guest Rewards Platinum Mastercard, 10/17/15, $15,000 CL
*Bank of America AAA Member Rewards Visa, 3/9/17, $15,000 CL
*Chase Freedom Unlimited Visa, 6/29/20, $11,000 CL
*Chase Freedom Flex Mastercard, 11/9/20, $9900 CL
*Capital One SavorOne Mastercard, 3/30/21, $10,000 CL
*Wells Fargo Propel American Express, 4/11/21, $10,000 CL

Next target credit cards:
*US Bank Cash+ Visa
*Wells Fargo Active Cash Visa, PSECU Founder's Card Visa, or Chase Sapphire Preferred Visa
*Citi Custom Cash Mastercard
*Elan Financial Services Max Cash Preferred (S&T Bank Visa version)
Message 8 of 11
FormerCollegeDJ
Regular Contributor

Re: Best way to use cards

I have a few other thoughts with regard to the OP's efforts to improve his/her credit score and pay down credit card debt:

 

1) This can't be emphasized enough, but your primary goal, above maximizing your cash back/other credit card rewards or seeking higher credit limits, is to pay down and eventually eliminate your existing credit card debt.  If that involves using a debit card or cash on your new discretionary spending because you can't control your "new" credit card spending and you force yourself to appropriately budget (while also paying down the existing credit card debt), do that.  Paying high credit card APRs/interest rates is not worth it and is a losing proposition; the negative of paying that high interest significantly more than offsets the benefits derived from credit card rewards.  (Of course, if you don't want to do that, that's alright for someone like me or other people who have high credit scores and play the credit card rewards game; it is those high credit card interest payments some people need to make that help subsidize the rewards rates the credit card issuers can offer and people who can manage their credit cards well can exploit to their advantage.)  As I already noted, you have to pay significantly more than the minimum required payment (depending on the credit card balances, probably on the order of at least 3-4 times the minimum payment) to really make a dent in credit card debt.

 

2) This isn't a hard and fast rule, but it is generally easier to track credit card spending when you only put spend on 1-2 cards per month, regardless if they offer rewards or not.  You can more easily identify what you are spending per month that way than if your spending is spread between say 4-5 cards.  Of course, low credit limits can make this difficult, but if managing your spending is a challenge, making multiple payments on the card per month helps control your spending while at the same time allowing you to use fewer cards for spending and not having a relatively low credit limit come into play as much/at all.  Obviously putting spend on credit cards that provide rewards is preferable, but I'll be so bold to say that if you can't clearly track/understand your monthly credit card spending and available budget based on your income, you shouldn't be focusing on credit card rewards.

 

3) Some people may disagree with me, but IMO it is easier to track credit card spending across multiple cards when they all have approximately the same monthly closing date (i.e. the day before the monthly statement is issued).  When you have a lot of cards, it becomes confusing when say you have five cards and their closing dates are the 7th, 13th, 18th, 22nd, and 28th of the month; tracking what payments are due when is harder, and it is easier to forget to make a payment on one of the cards.  When all of the cards have the same or very similar monthly closing dates, you know when all of the credit cards come due and you can pay all of them off at once.  In my personal case, I make sure just about all of my cards have monthly closing dates around the 27th/28th of the month or as close to those dates as possible.  You can always call the credit card issuer to request a monthly due date change; the monthly due date is usually about five days earlier in the month by date than the closing date, though that varies from bank to bank; in Chase's case it is three days.  (For example, with cards that have the 27th of the month as the statement closing date, with many credit card issuers the credit card payment will typically be due around the 22nd of the following month.)  Having consistent monthly closing dates does NOT prevent you from paying off your cards multiple times during the month (i.e. treating your credit cards more like a debit card) if you so choose.

Playing the credit card rewards game since early May 2020.

Current credit cards:
*Discover Cash It, 10/5/94, $10,000 CL
*American Express Hilton Honors, 9/23/96, $16,500 CL
*Kohl's store card, 7/31/00, $2500 CL
*Chase Amazon Rewards Visa, 10/29/06, $7000 CL
*Citi Sears/Thank You Rewards Mastercard, 9/19/09, $2001 CL (LOL)
*Citi My Best Buy Visa, 12/29/11, $4600 CL
*Bank of America Amtrak Guest Rewards Platinum Mastercard, 10/17/15, $15,000 CL
*Bank of America AAA Member Rewards Visa, 3/9/17, $15,000 CL
*Chase Freedom Unlimited Visa, 6/29/20, $11,000 CL
*Chase Freedom Flex Mastercard, 11/9/20, $9900 CL
*Capital One SavorOne Mastercard, 3/30/21, $10,000 CL
*Wells Fargo Propel American Express, 4/11/21, $10,000 CL

Next target credit cards:
*US Bank Cash+ Visa
*Wells Fargo Active Cash Visa, PSECU Founder's Card Visa, or Chase Sapphire Preferred Visa
*Citi Custom Cash Mastercard
*Elan Financial Services Max Cash Preferred (S&T Bank Visa version)
Message 9 of 11
Herb8108
Established Member

Re: Best way to use cards

I agree 100% with you so I set up all my cards billing dates for the same which is the 1st/2nd of the month all my cards are on auto pay so the auto pay is set to the minimum payment but I do that so I can make the payments on those accounts myself I've been spreading the payments to each card paying more than the minimum so I should be debt free in terms of credit card debt in the next 2/3 weeks I make big payments so I may just pay 3/400 on a card  at a time and lower all of the balances and just continue until all is paid but they will all be paid within the next 2/3 weeks for sure and then I will use them like a debit card I just won't be charging to much and paying them back in full

More Life, More Credit, More Power
Message 10 of 11
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