A Basic Understanding of Credit CardsBy Matt Langford on 26 Feb 2019
A lot of people miss out on amazing travel benefits due to a fear or misunderstanding of credit cards. Often times, it’s because of stories surrounding the horror of accruing too much debt via credit cards and high interest rates. I’m going to attempt to break down how credit cards work on a very simple level to hopefully address certain fears you may have and explain how you can benefit from having one or more of them.
What a Credit Card is NOT
- A credit card is NOT a loan.
- A credit card is NOT a way to spend more money than you have.
- A properly used credit card does NOT hurt your credit.
- A credit card does NOT allow for unlimited spending.
Basically, if you simply view your credit card as a bank/debit card and use it as such, you’ll have no issues. This means that you need to only spend money that you currently have, pay off the card IN FULL frequently (I suggest multiple times per month), and NEVER carry a balance from month to month. If you stick to those 3 things, you won’t have any issues with 99% of credit cards, no matter the interest rate or other terms.
Credit cards can have absurdly high interest rates, but those only come into play if you don’t pay your statement balance off in full every month. It’s easy to avoid them.
What a Credit Card Can Do For You
- Help develop your credit and increase your scores
- Earn points that can be redeemed for travel, products, and more
- Earn cash back
- Extend warranties for free
- Provide higher status for airlines, hotels, and rental car agencies
- Provide rental car insurance
- Provide less hassle when spending internationally
- Provide discounts for certain products
- Much, much more!
Credit cards are incredibly powerful and can provide benefits that’ll improve travel and expenses for you over and over. For instance, I have increased status with United Airlines, Hilton Hotels, National Car Rental, Avis Car Rental, Silvercar Rentals, Marriot Hotels, and more simply due to my choice of credit cards. While there are people who possess 10-20+ credit cards, I’m not one of them. I’ve managed to gain everything I need with 3-4 credit cards, most of which I keep in a drawer and rarely use.
Finding the Right Credit Card
Finding the travel credit card made exactly for you can require some research. There are a few things I suggest doing:
- Make a list of the travel companies you see yourself using the most. I suggest picking one airline, one hotel chain, and one or two rental car agencies.
- Gain an understanding of your credit score. You can use free apps (such as Credit Karma) to get an estimate of your score.
- Find cards that include (a) the most things that benefit you and (b) work with your credit score.
- Don’t be afraid of annual fees. In many cases, you’ll recoup that fee easily.
As an example, I knew I needed a card that works well with United Airlines (my city has a small airport that features United), Hilton hotels (locations everywhere), and National Car Rental (just a preference).
By doing a little research, I ended up going with the Chase Sapphire Reserve and an American Express Hilton Card. Both cards have multiple benefit levels that require different credit scores. I’ve been paying attention to my credit for years, so I was fortunate enough to be approved for their maximum benefit options. I use my Chase Sapphire for almost everything I purchase. The only time I ever use the AmEx is when I’m booking a hotel.
Using the cards above, my family of 3 has been able to take many mostly free trips over the last 2 years (including 2 round trips to Hawaii in a span of 8 months). In addition to the common travel benefits, we’ve also received cash back, extended warranties, free TSA PreCheck, and points bonuses.
In summary, don’t be afraid of credit cards! Pay it off every month and reap the rewards.
If you need help finding the card(s) that will work for you, feel free to reach out on Twitter and I’ll do my best to help.