Sunday, 24 September 2023

Top Credit Card Mistakes | 8 Things to Avoid & What To Do Instead

31 Jul

Hi there, it's Ernest from Trip Astute In this video, we're reviewing our top points and miles mistakes that people make, particularly those new to the hobby

(light chiming music) Collecting points and miles is a fun but complex hobby There are so many rules and they always seem to change as the issuers offer new points programs and products However, there are a couple mistakes that seem to be pretty common, especially for those who are just starting out in the hobby In fact, I'm probably guilty of several of these mistakes So today, we're gonna cover our top eight mistakes and what you should do instead

Number 1: Not knowing your credit score or history One of the most important aspects of whether you can get a specific credit card is your credit score and history Sites like Credit Karma and Credit Sesame can help you get your score and history for free, as well as tell you how many cards you applied for in the past and when Also, Credit Karma can tell you the odds for getting an approval for a card based on your credit factors For example, the Chase Sapphire Reserve and the American Express Platinum are both premium cards, so they tend to require a strong credit score and history in order to get an approval

Knowing your odds before applying can be super helpful when determining which cards to pursue Number 2: Not understanding your travel needs and goals This is really important when developing your strategy for points and miles Many cards have specific bonus categories, so it's important to understand whether they match up with your general spending Also, your travel preferences and goals can greatly influence which card is best for you

For example, if you prefer staying at Starwood Hotels, then you probably are best served with an American Express card like the Amex SPG If you prefer to stay at an Airbnb or boutique hotel, you might be better off using a flat rate travel rewards card like the Barclaycard Arrival Plus or the Capital One Venture card Number 3: Avoiding annual fee cards I can't tell you how many people I know who have told me that they wanted to get the Chase Sapphire Reserve, but opted for the Preferred instead because they couldn't stomach the $450 annual fee However, when I broke down the cost and factored in the annual travel credit of $300 and the Global Entry fee credit, it actually made sense to get the Reserve card

While you shouldn't pay for a card that has an annual fee where you don't feel like you're getting the full value, I always recommend evaluating the big picture to see if it makes sense For more information, check out our credit card annual fee video Number 4: Not understanding the issuers' rules I hear a lot of stories of folks who apply for a credit card then try to apply for another card the next week, only to get denied for too many credit inquiries There are some basic rules on what you should and shouldn't do, and we've covered them in our "Tips and Tricks When Applying for a Credit Card" video

Keep in mind too that each issuer has specific rules, so you want to be careful and strategic when planning your applications Number 5: Not challenging an issuer's decision Even those of us that have been doing this for years get rejected for new cards In fact, I would argue that the longer that you've been involved in this hobby, the more likely you are to have too much available credit, so issuers may be hesitant to give you a new card If you do get rejected, don't hesitate to call the reconsideration line and ask whether there are any options

We've covered some of these tactics in the "Tips and Tricks" video mentioned earlier Number 6: Not calculating the value per point when we're deeming rewards How and if you redeem points is often dependent on the value that you get Sometimes I'll opt to pay rather than redeem if I don't feel like I'm getting a decent cents per point value For some basic guidelines, check out The Points Guy's monthly valuation of points and miles currencies

He does a great job of explaining how much he thinks each point is worth, which should give you an idea of how much you should expect to get when booking a trip I usually will divide the dollar value by the equivalent number of points needed in order to get the cost per point value This can help inform whether I want to transfer the points to a travel partner or book through a travel portal Number 7: Being too aggressive with your spending If you get a new credit card, you want to be careful not to spend too much too soon

Remember that the issuers get nervous when they see risky spending patterns, especially if you don't have a long credit history or you haven't used a lot of credit in the past One of the easiest ways to get flagged for high risk is to max out a new credit card Also, the flip side is to make sure you're not spending too much that you can't even pay off your bill The points hobby is only lucrative if you don't carry a balance and you're able to pay off your bills Any interest that you'll have to pay will definitely negate the points earned

Number 8: Not developing a relationship with the issuer I hear about a lot of folks who cancel their credit cards as soon as they meet their minimum spend and earn their opening bonus This is a really bad idea, especially since you're basically showing the issuer that you were just trying to churn the card in order to get the bonus A more long-term and strategic way of thinking is that you want to build a relationship with these issuers so you're able to get new cards and products from them in the future For example, I have a ton of Chase credit cards, and I decided to move my personal and business checking in order to help further that relationship

When I recently applied for the Ink Business Preferred card, it was a lot easier to get an approval since I had a history of doing business with the bank And those are our top mistakes that beginners make when entering the point and miles hobby Do you have any extra tips or suggestions, especially for those of you who've been doing this for awhile? if so, please share them below in the comment section Also, let us know if you have any questions If you're looking for some of the latest credit card offers, check out our page on our website

I've included a link below and also on-screen If you enjoyed this video or found it useful, please hit the "like" button and consider subscribing Also, visit our website and subscribe to our newsletter for travel articles, updates, and contests Until next time, travel safe and travel smart

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