[00:00:00] Speaker A: In this episode, we give you some realistic tips that you can use to save you time, money, and maximize the value of your credit cards. Let's get started.
[00:00:08] Speaker B: Let's get some money from new money new problems. It's the new Money New Problems podcast, a show for successful professionals searching for the tools they need to navigate financial opportunities and obstacles they've never seen.
Negotiating compensation, purchasing your first investment property, helping your family with money, the highs and lows of entrepreneurship. New money brings new problems that require new solutions. Join us as we work through them together.
I'm Brenton Harrison, and this is the New Money New Problems podcast.
[00:00:46] Speaker A: Hello. My name is Brenton Harrison of New Money new problems and your host for the new Money New Problems podcast. I hope that you have been enjoying this series that we've been doing on credit scores and credit cards. And in this episode, I'm going to try to give you some tips that are things that are easily manageable, that you can do without adding time to your day. But by just having a knowledge of them can save you some time and money. The first two tips have to do with how you maintain your credit score. And number one is making sure that you update your annual income whenever asked by your credit card issuer. This is typically something that a cardholder will ask you to do every twelve months, some every six months, and the like. Um, if you're like most people, you probably just ignore that notification because in your mind, you don't understand the importance or see the value of keeping that household income up to date. But when you have increasing household income, making sure that your credit card issuer knows it can really help in the process of what I call bulletproofing your credit score. And here's why. Unless it's a particular type of Amex card, when you sign up for a credit card, you don't just get the card itself. You also get a credit limit, beyond which point you can't borrow. And there are many factors that go into calculating that credit limit that your credit card issuer, uh, gives you. One of those factors could be how many other cards you have out there, what they see on your credit score. But a big factor that goes into it is the size of your household income. And one of the reasons they ask for you to update your household income is because even after you've had that card issued, if you've had a significant increase in household income, your credit card issuer, uh, could consider raising the limit on that card. Now, how does that bulletproof your credit score? It's not about you getting a higher credit limit and going out and borrowing money. It's about after they increase that credit limit. If you have not borrowed any additional money, it automatically improves the utilization that you have when it comes to that particular card. Credit card utilization is a ratio of how much of your available credit you have borrowed at a particular point in time. And if you remember our episodes on FICO scores, it represents 30% of your FICO score. The lower your rate of credit utilization, the better it is when it pertains to how it impacts your FICO score. So let's say that we have a credit card right now that has a $10,000 limit and we owe $4,000 on that card. That's a 40% credit utilization ratio which will likely have a negative impact on this portion of our FICO score. But at some point in time, our credit card issuer is going to ask us to update our household income. And let's say that we have a significant increase in household income from one year to the next. We put in that new higher number and maybe a week or two later you get an email or an alert saying that they have increased your limit on that card from 10,000 to 15,000. When you have not increased or decreased the amount you owe, you still owe 4000. But because of that higher credit limit, instead of a 40% utilization ratio, it has now dropped to 27%. So just by keeping your credit card issuer up to date on what you earn, you can increase your credit limit and decrease your credit utilization. All without having to have a hard or soft credit pool by the credit card company. Next up is when you pay your credit card to make sure that it benefits your credit utilization. If you're looking on screen, you're looking at a screenshot of, uh, a video we did a few years ago called credit utilization explained when to pay your credit cards to help your credit score. We'll put a link to this in the show notes and it shows a person on screen with a credit card that has a statement period from January 15 to February 14. Statement period means this is the 30 day increment that he is going to charge purchases on this card and that's what he's going to have to pay off at the end of the statement period to avoid interest growing on this balance. Now we're going to assume that in this 30 day period, he spends $1,000 of what is a $2,000 credit limit. But even though the statement period ends on February 14, as long as he pays off his thousand dollars by March 10, he will not owe any interest. And when most people see this, they think, okay, but that's fine, as long as I pay it off by March 10, then my credit utilization will be zero. I, uh, paid off the balance in full by the time of the payment date, not understanding that the amount credit bureaus use to calculate your utilization ratio, it's what's listed on your balance at the end of the statement period. So you can see on this sample statement period that even if he pays in full by March 10, and his balance says zero on that date, because $1,000 was reported at the end of the statement period, he would have a 50% utilization ratio, which is too high. However, if this person were to set a calendar reminder so that a few days before the end of his statement balance, he goes ahead and pays off or pays down the card at that point in time, then at the end of that statement period, it will show a lower balance and it will improve his credit utilization ratio. So he could have still spent $1,000, but if he paid it off on February 12, as opposed to waiting till March 10, then his credit utilization would actually say zero instead of the 50% that it would be in our current example. Next up, we have a way to benefit you by lowering the fees that you see on your credit card. Last week, we went through some examples, a specific example of the Amex gold card. And the reason we use that is because it's a card that I actually own. And I shared in that episode of, uh, comparison of that card stacked up to two other cards and shared that even though that there were some benefits I could use with the Amex gold card, it wasn't something I thought I was using to the degree that I could even break even for the fee that I'm paying each year. Many times when people get tired of a credit card or they pay off a credit card, they will cancel the card, and subsequently they'll see their credit score go in the tank. And that has to do with what happens to your credit history when you close an open line of credit. Going back to the calculation of a FICO credit score, you can see that 15% of your score is comprised by the age of your credit. Every time you open a line of credit, it has a birthday. The older the average age of your credit, the better it is for your FICO score. This is actually why when people pay off homes or pay off student loans in the aftermath, they see an immediate drop in your credit. Because when you close that line. It erases the birthday and the credit history from your score in general. So if you've had a credit card that you've had for 15 years and for some reason you decide to cancel it, even if you manage that card poorly in the past, the fact that you've paid it down means that you should find a way to at least keep the line open, because if you don't, it would erase 15 years of credit history. So what you can do in this scenario is you can go to the credit card issuer as I did when I had the platinum card, and I can say, I want to stay in the Amex credit card family. Can you please downgrade me to a card with a lower fee? So they kept the credit line open and they downgraded me to the gold card. Now I'm in the same scenario where I'm looking at the car with $250 and saying, yet again, I don't think I'm using this to even break even for the card. So I might say, can you now downgrade me from the gold card to the green card? Or I might see a card in that family that has no credit card fee at all and maybe is a cashback card or one that's used for everyday spending. But the point of the matter is, if you found yourself in a situation where you have a clunker of a credit card, which doesn't mean that the card is bad, it just means that it's not the best card for you. If you stay within that credit card family and ask the to downgrade you, then you can put yourself in a position where you keep the credit line open but have a card with the lower fee. Or if you think that you would get more benefits by upgrading, even if it means paying a higher fee, maybe there's something about that rewards points program that you really value, then you can ask for an upgrade of the card. But the problem with that is if you downgrade the card, there typically is no credit inquiry. If you upgrade a card, it may be something that requires them to do a hard pull of your credit and treat you like a new applicant instead of a person who's already in that credit card family. Now let's get into some hacks that can really be helpful for you on an ongoing basis. And the first one that we're going to cover is making sure that you pay attention to the emails that are sent to you by your credit card company because those emails will often contain an offer or even an experience or reward from which you might take advantage if you're looking on the screen, you're looking at, uh, an email address. And in the search bar, we just searched Capital one, and you can see all of these different emails that have come in from capital one over the past several months. And you will typically see that there are types of offers that are sent to you via email that you might ignore, but they may have real value. For example, I'm looking at one that says, act now 10% back at Charles. I think it's Turwitt. But this is actually a place where I buy a lot of my dress shirts, and my credit card company is seeing that and saying, hey, you buy your shirts at this retailer. We actually have a partnership with this retailer so that if you buy with them, you can get $0.10 on the dollar for every dollar that you spend before May 27. Obviously, this offer has expired, but if I'm in a position where I need some new dress shirts and I'm trying to make sure that I blunt the cost of that purchase as much as possible, this is a way to say, hey, if I spend $100, I'm getting at least $10 back. And those $10 are points that I can use somewhere down the line to lower the cost of that overall purchase. You'll also see certain offers that are limited time offers where if you've managed that card well in the past, they may give you a special offer to thank you for, uh, having the card, but also to entice you to bring more funds over. For example, you're looking at another email from Capital one that says, act now on your promotional balance transfer offer. And they're giving me nine months to transfer funds from one card to their card. And after an initial transfer fee of 4%, I would pay 0% on those balances for a period of nine months. Now, this is something that you typically only see when you sign up for a new balance transfer card. As we went over last week, it's an introductory type offer that where they'll give you twelve or 18 months to bring a balance over at 0% interest. But because I've had this card for a long time, just by keeping an eye out on my emails, if there's something where I have a plan in place to pay down credit card debt, but the ideal time to do it is not within the next 30 or 45 days. This may be something I can take advantage of without having to risk opening up a new card and damaging my credit in the process. After the break, I'm going to show you some credit card tips that are specifically beneficial for travel. I'm going to show you how I stack credit cards with one particular card so that on average, I fly every other flight for free.
[00:11:27] Speaker C: This is the new Money New Problems podcast, a show for successful professionals searching for the tools they need to navigate financial opportunities and obstacles they've never seen. We'll be right back.
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[00:12:35] Speaker A: All right, in the second half of this episode, we're going to dedicate some of these rewards and perks to travel. And I wanted to give some space to kind of show you an example of how I use certain travel perks that, uh, are specific to a certain airline. But before we get specific, let's first go to how you can use transferred points from a credit card issuer to another vendor to your benefit. So if you're not familiar with what a transfer partner is, we're looking at an article on screen which we'll share in the show notes. It talks about the different transfer programs that you find from credit card issuers to what are mostly hotels and airlines, but in some cases they're general retailers as well. So the premise behind it is instead of you having a reward point at American Express, for example, you can keep it there and use it on that platform, or you can transfer it to the membership rewards points of, say, Marriott, and you can use them there if it gives you more juice for the squeeze. And if you're wondering why that would be helpful on the article, you can actually see a summary of some of the benefits. And most important to me, it is the protection against devaluation. I share that I typically travel on southwest. And if you take southwest as an example, one of the things that used to be a lot easier to get was if you had companion pass, where you could fly for a year with a companion pass with you for free. And all they would have to pay for is the taxes associated with the airfare, but they wouldn't have to pay for the airfare itself. Well, it has become harder and harder based on the value of those points and the amount that it takes to get companion pass. And what this article is saying is in a similar situation where the value of a point is decreased or the threshold that you have to reach to really benefit from it is increased. So in this article, they talked about some of the top credit card companies and the number of places to which you can transfer their points. American Express is actually at the top of that list, and you can see that they can transfer from everything from Air Canada, Air France, British Airways, Delta, Hilton, Honors, Marriott, Bonvoy, Virgin Atlantic, all of these different airlines and hotel vendors to which you can transfer points. And again, we'll put an article to this in the show notes and another hack that I would tell you, if you are traveling and you happen to be booking through like a Chase travel site and Amex travel site, and you are also booking at a hotel that you might have a membership profile with, maybe you are booking a rental car with Hertz through the Chase travel site. Well, not all of those travel sites give you the ability to what's called double up on rewards, meaning that if you book it through the chase travel site and get rewards there, it may not also give you the opportunity to benefit from having like a Hertz Gold club membership. But what you can often do if it doesn't give you the opportunity through that platform is you can book it through those travel sites or you can book it with those vendors directly. And even though it hasn't added the points for that secondary business during that process, after the reservation is made, you can call that secondary vendor and ask if those points or those miles can be applied to your account. And it's a way of doubling up on the value by getting it through the card and then also through your membership rewards program. So I want to show you an example of the progression of how you can use all of this knowledge for a credit card to your benefit. What you're looking on screen at first is an email from Southwest.com for a promotional offer that they said ends today. Want to bring a friend for free every time you fly? Here's how. Register now, then purchase one round trip or two one way flights by March 27, travel by May 22. And if you do that, you can have a person fly with you for free from August 5 to October 2 of 2024. Now, around this time, I knew that I had a conference in New Orleans that was going to take place before May 22. So I booked my ticket before March 27 for travel that occurred before May 22. And I got companion passed so that from August 5 fifth to October 2, one person could fly with me for free. It just so happens that September 2, which is smack dab in the middle of that timeline, happens to be our wedding anniversary. I also share with you that I have the southwest Rapid rewards priority card. And I know that with that card, for every flight that I booked through Southwest.com, i get three points for each dollar spent. And if I book hotels through their hotel partnership, I get two points for every dollar spent. So I'm going to now look for a flight for our anniversary. So I can go to the southwest website and I can see that right now they have a promotional sale where you get 50% off base fares with the code b day. So I'm going to take advantage of all three of these things and I'm going to price out with this sale a ticket from Nashville to Palm Springs. And I'm going to assume that we're traveling from September 7 to September 11. Well, you can see here that if I'm looking at their low fare calendar, that with this sale, we can get a flight out to California for as low as one, $9 and back from California for as low as $116. Remember that during this period, my wife is flying with me for free. So we only have to purchase one ticket. So this means that in total, for two people to fly to and from California before taxes, we can get there for as little as $225. But because we're getting three points for every dollar spent just off the flights, we will earn 675 rewards points because of that multiplier. But we have to have a place we stay when we're there. Going back to the credit card rewards, we know that we get two points for every dollar spent on hotels. So we can actually go to the hotel partnership through southwest.com and we can go to those same dates in Palm Springs. And what you'll see is it pulls up 515 properties, but it says that 13 of those properties are rapid rewards points plus properties, meaning that Southwest has partnered with particular hotels so that you get a multiplier of points above and beyond what you would typically receive if it were just point per dollar. Case in point, there's a Hyatt, uh, Palm Springs hotel that's listed here where if you spend $677 in total for four nights, you actually get almost ten times that in rewards points. You earn 6000 points just for staying at that hotel. You can also see at the top of this list the Kempton Rowan Palm Springs hotel. So this is clearly a very fancy hotel. The price for four nights is $1,100. This may not be a place where I would stay if we paid a ton for the flight, but remember, we got the flights for a couple hundred bucks. And here's the kicker. If we spend $1,100 at this hotel, you get 31,000 points and bonus points from south. But in addition to those 31,000 points, you also get two times points on the initial thousand that you spent. Which means in total you get almost 34,000 points just for the hotel. And you'll even find that they will typically, at least with Southwest, give you the ability for an additional fee to get even more rewards points. So for an additional $160, you can add on top of that 8000 points so that through this one vacation we would get about 40,000 rewards points. And that's why I said, based on this way of utilizing the rewards, you can yourself in a position where the next place I go by myself or a conference or some other work related event, I can likely cash out these points and not have to pay for my travel because of all that I earned in the previous trip. So I know this got into the weeds in terms of how these credit cards work, but I'm hoping that you found this beneficial to you and that they're actual items that you can manage on a day to day basis without feeling like you are a professional credit card hacker. We'll be back next week. We will probably deviate from the credit series a bit and get into some more general topics, and I hope to see you then.
[00:20:20] Speaker B: From new money new problems this was the new Money New Problems podcast, a show for successful professionals searching for the tools they need to navigate financial opportunities and obstacles they've never seen.
