Rules are made to be broken, and that includes some of the most popular credit card rules.
- Some common credit card rules aren’t right for everyone.
- Rules like using your cards regularly and not requesting too many cards are ones I have broken over the years.
The world of personal finance is full of rules for credit card use, and for the most part, they’re sound advice. I would never argue against paying your credit card in full every month, paying on time, or only charging what you can afford.
Rules like that are smart for everyone, but there are others that are not so set in stone. I found that there are some that I break all the time. They’ve all worked well for me, and depending on your situation and credit card goals, they may work for you, too. Here are the credit card rules I’ve broken.
1. Don’t apply for too many credit cards
I am what you could call a credit card enthusiast. I’ve applied for and been approved for dozens of the best credit cards over the years.
The reason I do this is simple. You can get many benefits from different credit cards, including rewards, travel perks, and my favorite, sign-up bonuses that you earn for reaching a minimum spend. If a credit card company is going to pay me to open a card and use it for my regular bills, I see that as free money.
However, there are risks in doing this. Applying for multiple credit cards in a short period of time can get in the way of building credit. And when you have multiple credit cards, you end up with more payments to manage, so it’s easier to accidentally lose one or overspend and end up in credit card debt.
You can benefit from using multiple credit cards, but I recommend that you take it easy. There’s no rush, so you can gradually add to your wallet as you find new cards you like.
2. Use your cards regularly so the card issuer doesn’t close them
This is the one rule I see all the time that has never been my experience. Of all the credit cards I’ve had, I can only think of a couple that have been canceled due to inactivity. It took over a year of inactivity in each case, and all the card issuers told me in advance by email that I had to use the card if I didn’t want it to be cancelled.
It is certainly possible for unused credit cards to be cancelled. My philosophy is that the credit cards that matter to me are the ones that I use regularly. If a credit card company cancels a card you weren’t using anyway, it’s not a big loss.
I think a good adjustment to this rule is to make sure you’re using the credit cards you want to keep. That’s easy if you stick to cards you love and that fit your lifestyle and spending habits.
3. Know the APR of your credit card
If you asked me about the APRs on my credit cards, I doubt I’d get them right. The good thing about credit cards is that if you pay in full every month, the interest rate doesn’t matter, because they don’t charge you any interest. In most cases, that’s also the best way to use credit cards.
There are some situations where it is important to know the details of your credit card interest rate. If you’re paying off credit card debt spread out over multiple cards, interest rates are one way you decide which card to pay off first. Paying off the card with the highest interest rate first is known as the debt avalanche method, and it’s the fastest and cheapest way to get out of debt.
If you need to carry a balance on one of your credit cards, it makes sense to check the APRs and choose the card with the lowest rate. However, 0% APR credit cards are the best option here. They offer a 0% interest rate for an introductory period and some offers last a year or more.
4. Be selective about credit cards with annual fees
Credit cards with annual fees have a bit of a bad rap. Experts always recommend that you be careful with cards with annual fees, as they add to your bills.
While there are great credit cards with no annual fee, annual fee cards generally have many more advantages. If you’re able to use these benefits, you’ll likely get a lot more value from the card than you’re spending on the fare.
For example, there are several popular hotel credit cards with annual fees in the $100 range. Many include a free night certificate, and it can be redeemed for a night that would otherwise cost well over $100. If you stay at that hotel every year, a free night certificate alone is enough to make the annual fee worth it.
Also remember that opening a credit card is not a lifetime commitment. If you think you’re not getting your money’s worth, you can always downgrade the credit card to one with no annual fee or cancel it altogether.
None of those credit card rules are bad, they just don’t work for me. Credit cards can be a very useful financial tool, and to get the most out of them, you need to find the rules that work best for you.
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