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Making the Most of Your Credit Cards

Savvy consumers know to use rewards-based credit cards ― as long as the balance is paid in full and on time every month. By using a rewards credit card for everyday purchases, rewards can be redeemed for things like:

  • Taking unique trips
  • Purchasing brand-name merchandise and gift cards
  • Cash redemption options
  • Gifting your rewards to family and friends, or
  • Turning rewards into donations for causes you care about

Look for lower rates with special credit card promotions

Another advantage of strong credit is it may help your eligibility for special credit card promotions with a 0% annual percentage rate (APR) introductory rate. You can use the card to make a large purchase, pay for a major expense, or transfer high-interest-rate balances ― and take advantage of  0% introductory APR on transactions that are included in the offer during the introductory period.

Be sure to read the terms of the offer carefully, so you know if there are any balance transfer fees, and if the same interest-free period applies to both purchases and balance transfers.

 Tip 

If you have an introductory rate, calculate the monthly payment needed to repay the balance by the end of the intro period. Set up automatic payments to ensure your balance is paid off before the regular rate begins.

Important considerations – how credit card usage may impact your credit score

  • Watch your credit utilization rate: Your credit utilization is the amount of revolving credit you are using divided by the total amount of credit you have available. To calculate it, take the total amount you owe on all of your revolving credit (credit cards and lines of credit), divided by your total combined credit limits to determine your credit utilization rate. This makes up 30% of your FICO® Credit Score, so paying attention to the percentage of available credit you are using can have a big impact on your credit score. Most experts recommend keeping your credit utilization rate below 30% of you credit limit, the lower your utilization the better.
  • Keep credit card accounts active. Since credit utilization has a big impact on how your credit score is calculated, it may help your score to keep your credit cards active. The most common reason credit cards close is due to non-activity. If you haven’t used your card in some time, your issuer may close your account due to inactivity. This may negatively affect your credit score. For example, if you have $7,000 in available credit across several credit cards and are currently using $2,000, your utilization rate is 29%. However, if you have a credit card issuer close down a $3,000 credit limit card due to inactivity, your available credit drops to $4,000 and the utilization rate on that $2,000 debt load automatically increase to 50% which could result in a lower credit score.
  • Build the age of your credit file. The average age of accounts is another key factor in how your credit score is calculated, so keeping accounts active may also help build the length of your credit file. It could negatively affect your score if a provider closes one of your oldest credit lines due to inactivity.

 Tip 

Consider putting a small recurring monthly charge onto an unused credit card to keep the account active. Set up an automatic payment to ensure the bill is paid in full monthly. Just be sure you have the funds in your account to cover the payment in order to avoid any potential overdraft fees.