Deal yourself a new hand of credit cards

By Linda SternSat Oct 21, 3:32 AM ET

If you’re still being loyal to the one credit card you’ve had for years, move on.

With rewards programs changing almost daily, it pays to load up on plastic and be strategic about how you use it.

That applies, of course, only to those consumers who pay off their card balances every month, never pay late and have good credit scores. Everyone else should stick with Plan A: the fewer cards the better.

But with credit card companies branding segmenting cards so they can capture different categories of consumers, smart consumers can beat the issuers at their own game. They can apply for a handful of cards and use each card only for the benefit that makes it the most profitable.

Here’s how to play the credit card game.

– Get educated about what’s out there. Review lists of cards at places like www.indexcreditcards.com and www.cardratings.com. Look for cards that seem to offer fat rewards programs, then dig down into the teeny tiny print of the card offers to find out the details of the reward plan. Does it expire in 12 months? Are there annual caps on the rewards you can get? Credit card issuers are notoriously bad at disclosing fees, traps and tricks, so delve deeply. (And note that some cards listed here may have changed their policies or slipped in rules and limits I was unaware of when writing this, so check them out for yourself.) To find any specific cards mentioned in this article, go to one of those sites and follow links, or simply search online by the card name.

– Come up with a household card plan. Pick three to five cards that will help your family get what it wants and needs. For example: one gas card, one good cash-rebate card, a zero-percent interest card for parking your loans, and a specialty rebate or airline miles card — or two, if you’re big spenders. A husband and a wife, each with a good credit score, can separate their card applications, to take advantage of new deals from issuers who may have already signed up one spouse but not the other.

– Never pay late, or the whole tower of cards can come crashing down on you in a flurry of penalty rates and charges. Pay your bills online and make sure you send an automatic payment to each credit card before its due date.

– Get that free loan. Almost all card issuers now are offering a card that nets you zero percent interest for a year on cash advances and balance transfers. If you already owe a sizable amount on your home equity line, get one of these cards and transfer as much of your home equity balance to it as you can. Once you’ve done that, call the issuer and find out the date you must pay off the balance by to avoid any interest charges. Put that on your calendar, put the card away and don’t use it for anything else until you’ve paid off your balance. And, make sure it’s not charging you any more than $60 or $75 in balance transfer fees.

– Choose your main rebate card. Pick a rebate you like and use this for major purchases that don’t fall into another category you have a card for. Some candidates to check out are The Fidelity Investments Rewards Visa, the Citibank Platinum Rewards MasterCard and the Chase Free Cash Rewards MasterCard. These cards limit the amount of rewards you can get in a year. Two that don’t, though their rewards structures are more complex, are the American Express Blue Cash program and the Discover Card with the cash-back bonus program,

– Select a card for extra categories where you spend a lot. Consider the Chase Home Improvement Rewards Visa for money back at paint and hardware stores, and the Costco/American Express True Earnings card, which gives extra rewards for travel and meals out. The Citibank Drivers Edge Card lets you earn as much as $1,000 a year in rebates on gas and grocery purchases, and also gives you rebates for the miles you drive.

– Do over. Next year, add up what you earned and saved in a year of playing the credit card game. If you did it right, it will probably be more than an airline ticket’s worth of cash.

By then, all the programs may have changed, so review the offerings and consider closing cards that aren’t so good anymore and applying for new ones that are.

Linda Stern is a freelance writer. Any opinions in the column are solely those of Ms. Stern. You can e-mail her at lindastern(at)aol.com.

This entry was posted on Saturday, October 21st, 2006 and is filed under Credit Cards, New Credit Cards. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
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How Credit Scores Affect Mortgage Applications

With a good credit score an applicant will receive prompt response from many lenders, all of them offering low interest rates and low down payment options. The loan amount offered also may be high. On the contrary a low credit score would result in a lot of rejection from various mortgage financers. Because creditors wouldn’t come forward easily to give credit to individuals that have a history of difficulty in repaying existing loans. After all, creditors take risk when they finance mortgages against the credit history of a debtor. Naturally, they will wish to remain on the safe side and pick up less risky ones that have good credit histories. A good credit score means less chance of missing on payments and therefore less risky.

But there are some real risk takers that will come forward to finance mortgages for individuals with bad credit scores. They would charge high down payments and always high interest rates though. They may also fix additional charges for every little paper work and may charge high closing rates. The loan amount offered will also be considerably less. The individual with poor credit scores will not have much choice but to accept the terms and conditions as there are no other alternatives. This is a tight situation and to avoid this you must have a good credit score.

People with bad credit may fall in to the trap of ’secured loans’. Secured loans are the ones where the loan applicant offers an asset as collateral security. The lender becomes secure about the repayment of the loan and not the borrower. Securing a loan with bad credit score becomes easy only when the applicant is willing to offer some asset as collateral security. This again is a very dangerous situation where an individual runs the risk of losing his entire collateral asset in case of failing to pay the loan installments in time. An individual should always avoid such type of a loan.

Resort properties normally require large amounts of finance which a person with bad credit may find it difficult to obtain. So it is always advisable to keep your credit score high. Incase the credit score becomes low due to unavoidable financial reasons it can be improved upon. There is no need to lose hope simply because a person has a low credit score. If the property that he intends to buy has good equity he should go out and try to obtain finances for it. There are many sub prime lenders willing to offer their services.

For a review of your credit report as it relates to a mortgage loan and a consultation on the best loans available to you, give us a confidential, no obligation and no cost call.