What are the 4 rules of this game?
Credit card companies want you to carry a balance. They make most of their money off the 30% interest rates they charge consumers. They offer rewards to lure customers into using their products. If you play this game, you are essentially beating the credit card company at its own game. Here are some rules to follow and you will always come out ahead. Guaranteed.
1. Never carry a balance
Treat your credit card like a debit card. Can you afford what you are buying? Do you have enough money in your checking account to support this purchase? You should always ask these questions when deciding to make a purchase.
You should use account software like Quicken or an Excel spreadsheet to create a budget and monitor expenses. This will not only help you stay organized but also on top of your finances as well.
2. Never miss a payment
You should never miss a payment. If you miss a payment, your credit score will tank. This will lead to higher interest rates on loans (ex. auto loans) and denials from opening new credit cards. In addition to the interest, you will most likely have to pay a late fee which varies by credit card.
Use the auto-pay feature ensuring you never miss a payment. Set calendar notifications for payment due dates as well to ensure the payment has gone through. Banks are not that forgiving!
3. Never pay a foreign transaction fee
There are many credit cards such as the Bank of America Premium Rewards Credit Card or the American Express Platinum Card which have no foreign transaction fees. There is no use paying 3% extra every single time you swipe that debit card. And remember, always pay in the currency of the country you are in. Never let the bank make the conversion as they usually mark it up. For instance, when you are in Germany, ALWAYS pay in Euros when the clerk asks you. If you pay in dollars, you will likely have to pay 3% extra.
4. Never leave a credit card because of its annual fee
Most credit cards offer significant value even if they have an annual fee. For instance, the American Express Platinum Card offers Hilton Diamond Status. This leads to free breakfast at every Hilton property including Waldorf Astoria and Conrad branded hotels. These are top-rated 5-star hotels, and breakfast can run over $20 a person in these hotels. While the American Express Platinum has a $550 annual fee, this one benefit out of many can be worth a lot for a typical family of 4.