It's time to go on offense and take full advantage of your credit cards.
In this email I'm going to give you everything you need to improve your credit while automatically being rewarded for the purchases you're already making and take everything you can from the credit card companies.
Here'show:
1. Pay off your credit card regularly.I'm lazy. I mess things up. I'm human!I know you've probably heard this, but what you may not recognize is that your debt payment history — making payments on time — represents 35 percent of your credit score.
35 PERCENT.
In fact, the single most important, and easiest, thing you can do to improve your credit is to pay your bills on time. Whether you’re paying the full amount of your credit card bill or risking my wrath by paying just a component of it, pay it on time.
Lenders like people who pay on time, so don’t give your credit card the opportunity to raise your rates and lower your credit score by being a few days late with your payment. Today, most people pay their credit card bills online, but if you haven’t set up automatic payments, please understand that man has discovered fire and join us in our modern times.
Please log in to your credit card’s website and do this now.
2. Try to get your fees waived on your credit cards.This can be a quick, easy way to optimize your credit cards just by asking. Remember: these companies pay hundreds of dollars in acquisition costs to land you as a customer, you have leverage! Call them — or visit the chat box on their website — using the phone number on the back of the card and ask if you’re paying any fees, including annual fees or service charges.
It should go a little something like this:
YOU: Hi, my annual fee is coming up and I’m wondering if there is a retention offer associated with my account.
CREDIT CARD REP: Thank you for calling in. Yes I see there is a retention offer for 20,000 points on your account if you spend $3,000 in the next 90 days.
(( If they say no, bring up your leverage. “YOU: Oh, that’s too bad. I’ve been a customer for X years, make my payments on time, and have a credit score of 785… which is pretty good. What can you do to keep me a customer? ))
YOU: Thank you for taking a look. I’m wondering what we can do about the annual fee. I’m really not getting as much benefit from the travel perks as I thought I would.
CREDIT CARD REP: I completely understand. It looks like I can waive the annual fee for you. But you’re going to have to pick, do you want the points or the fee waived?
YOU: (Make a decision and bask in your glory.)
Earlier I mentioned that it can be worth paying annual fees for rewards cards. This is true — but why not ask? Remember, credit card companies are competing for your business, which can benefit you.
I typically recommendcalling them one month before your annual fee kicks in and ask them to waive the fee.
Sometimes it works, sometimes not.
You should always ask if your credit card company has special programs or membership offers to get the annual fee waived.
E.g. military members who meet the requirements for benefits under the Service-Members Civil Relief Act (SCRA) can get their annual fee waived with American Express, including the now $695 Platinum annual fee.
If you decide that your credit card fee isn’t worth it, ask your credit card company what they can do for you.
If they waive your fees, great!
If not, ask if you can keep the account open and switch to a no-fee credit card.
3. If you carry a balance on your credit card, negotiate a lower APR.Your APR, or annual percentage rate is the interest rate your credit card company charges you. APRs fluctuate, but in general, they hover around 14 - 22 percent.
That is high!
This makes it extremely expensive if you carry a balance on your credit card. Put another way, since you can make an average of eight percent in the stock market, your credit card is getting a great deal by lending you money.
If you could get a 14 percent return, you’d be thrilled.
You want to avoid the black hole of credit card interest payments with everything you’ve got.
I’ll touch on this more when I cover how to pay off cover credit card debt aggressively, but you should avoid the 0 percent introductory offers. They seem great, but I can’t tell you how many times I’ve seen people suckered into spending because they’re not paying interest, and then suddenly they’ve got a $20,000 balance to pay off.
If you do find yourself paying interest, call your credit card company and ask them to lower your APR. If they ask why, tell them you’ve been paying your bill in full and on time for the last few months, and you know there are a number of credit cards offering better rates than you’re currently getting.
4. Keep your main cards for a long time, and keep them active — but also keep them simple.Lenders love to see a long history of credit, which means that the longer you hold an account, the more valuable it is for your credit score. Some credit card companies will cancel your account after a certain period of inactivity.
To avoid having a credit card closed, set up an automatic payment on it.
For example, I set up one of my credit cards to pay a $9.99 subscription through my checking account each month, which requires zero effort on my part. But as a result, my credit report reflects that I’ve had the card for more thaneight years, which improves my credit score.
If you have a credit card, keep it active using an automatic payment at least once every three months.
Now the one tricky part: If you decide to get a new card, should you close your old credit card?
Typically, no.
But if you have lots of cards that you never use,consider this: If you have opened 20+ credit cards to “churn” rewards, and now you can’t keep track of everything, you may need to make a decision on riskvs. reward and simplicity vs. complexity. As long as you have good credit and youpay your balances on time and in full, closing an old credit card will not have a major long-term impact on your credit score.
For most people, having two or three credit cards is perfect.
It is for me.
If you have a special reason to have more cards —such as owning a business or are you are intentionally maximizing sign-up rewards, great.
But if you find yourself swamped with the number of cards you have, close the inactive ones. As long as you have good credit, the long-term impact will be minimal and you’ll sleep easier at night with a simple financial system you can keep track of.
Also: Think ahead before closing accounts.
If you’re applying for a major loan — for a car, home, or education — don’t close any accounts within six months of filing the loan application.
You want as much credit as possible when you apply.
5. Get more credit.Before I explain, this section is only applicable if you have no debt. I’m serious. This tip is only for financially responsible people: You have no credit card debt and pay your bills on time and in full each month.
It’s not for anyone else.
It involves getting more credit to improve something called your credit utilization rate, which is simply how much you owe divided by your available credit. This makes up 30 percent of your credit score.
For example, if you owe $5,000 and have $5,000 in total available credit, your ratio is 100 percent (($5,000 / $5,000) x 100), which is bad. However, if you owe only $1,000 but have $5,000 in available credit, your utilization rate is a much better 20 percent (($1,000 / $5,000) x 100).
Lower is preferred because lenders don’t want you regularly spending all the money you have available through credit — it’s too likely that you’ll default and not pay anything.
Lenders don’t like that kind of risk.
As a general rule: You should try to keep your utilization rate below 30 percent. This is a common mistake I see. “But Ryan, I have $10,000 in available credit, why can’t I spend all the way up to the $10,000??!”
You can.
But again, this will negatively impact your credit over the long term.
To improve your credit utilization rate, you have two choices: Stop carrying so much debt on your credit cards (even if you pay it off each month) or increase your total available credit. Because we’ve already established that if you’re doing this, you do not carry a balance, all that remains for you to do is to increase your available credit. To do so, call your credit card company and request more available credit.
Here’s how:
YOU: Hi, I’d like to request a credit increase. I currently have $5,000 available and I’d like to make it $10,000.
CREDIT CARD REP: Why are you requesting a credit increase?
YOU: I’ve been paying my bill in full for the last 24 months and I have some upcoming purchases. I’d like a credit limit of $10,000. Can you approve my request?
CREDIT CARD REP: Sure. I’ve put in a request for this increase. It should be activated in several days.
In 2022, some companies require a simple form to complete online. While others like Chase, US Bank, and a few others will require a hard inquiry — not necessarily a deal-breaker but may temporarily affect your credit score.
6. Tap into your credit card’s secret perks.Before I get into rewards programs, let me just say this: Just like with car insurance, you can get great deals on your credit when you’re a responsible customer. In fact, there are lots of tips for people who have very good credit. If you fall into this category, youshould call your credit cards and lenders once a year to ask them what special advantages and perks you’re eligible for. Often they can waive fees, extend credit, and give you private promotions that others don’t have access to.
Call them and use this script:
YOU: Hi there. I checked my credit and noticed that I have a 750 credit score, which is pretty good. I’ve been a customer for 6 years, so I’m wondering what special promotions and offers you have for me… I’m thinking of fee waivers and special offers that you use for customer retention.
As discussed, credit cards also offer rewards programs that give you cash back, airline tickets, and other benefits, but most people don’t take advantage of all the free stuff they can get.
For example, most of us are familiar with using points to get free flights and hotels, but did you know there are even more secret perks?
Here are a few examples:
Most importantly, your credit card automatically tracks your spending, making it easy for software to download and categorize your spending.
(It’s a good thing.)
For this reason alone, I put almost all my purchases on a credit card — especially the large ones.
The key takeaway: Call your credit card company and ask them to send you a full list of their rewards.
You can use this script:
YOU: Hi there. I’m realizing I may not be taking advantage of the great perks you offer from being a cardholder, could you please share more about what I might be missing?
(( Purchase protection, extended warranty, return protection, cell phone protection, car rental loss and damage insurance, baggage insurance, trip delay insurance, trip cancellation or interruption insurance… and more. ))
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Phew.
Are you seeing how you can completely beat the credit card companies at their own game and tap into thousands of dollars of free perks??
ACTION ITEMS
Make sure you're handling your credit cards effectively (3 hours)
Set up automatic payments so your credit card bill is paid off in full every month. Get your fees waived. Apply for more credit, if you’re debt-free. Make sure you’re getting the most out of your credit cards.
