So long as media has existed, different experts have offered advice and information on how to properly manage one’s credit. While the information has changed over time, there has been one constant: those who advocate for responsible management of credit to earn rewards and those who paint loyalty and credit card reward programs as potential pitfalls for those trying to build credit.
In a recent article posted on LinkedIn, one of these pundits explored how responsible credit use can be bad for the end consumer. In the article, the writer outlines a story of a Target cardholder who used her card and paid it off in full each month. As a result, the author speculates the reason the account was closed by the issuing bank was because the cardholder did not carry a balance – when in truth, the account was closed for not being used on a regular basis.
While the article’s headline was an extension of the truth, it made me consider some fundamental facts about our relationships with credit. Could being responsible about balances and credit card usage ultimately be one of our downfalls? Does one of the principles of frugal travel create a bigger problem in the end?
In times like these, it may be wise to consider the greater hobby of points and miles in light of where credit stands today. As we progress down the road, here are three credit management tips to consider.
Be smart about opening new accounts
In the past, many of us have written (or at least compared) our quarterly rounds of applications as a viable method to earn thousands of points and miles. Since then, credit card issuing banks have become increasingly careful about who qualifies for sign-up bonuses, with limits ranging from two years between sign-up bonuses, to one bonus per lifetime. In addition, having multiple inquiries on an account can have negative effects on a credit score. Although minuscule, a score point saved is a score point earned, especially when applied to major purchases.
Before partaking in the next “app-o-rama,” be sure to make a plan for your newfound haul of points. This includes not only finding a way to earn points without incurring debt, but also having a plan to use those points before they devalue. By being smart about opening up new accounts, travelers can ensure their habits are not only sustainable, but strategic as well.
Use credit cards on a regular basis, and pay them off promptly
In the case outlined above, the person in question did not lose their card because they paid off their balance every month. Rather, the person in question had their account closed because they did not use their card on a regular basis. In the terms and conditions of many credit card programs, the issuing banks often reserve the right to close accounts that go dormant without a balance for any given amount of time.
While this is rather rare on premium cards that come with an annual fee (including that perennial favorite, the Chase Sapphire Preferred), cards that do not have the membership fee attached may be cancelled after sitting dormant. Before an account gets closed, be sure to make a plan to keep these cards in use over time – lest they close due to a natural death.
Keep the cards you use, and close the ones you don’t
Finally, there is no shame in being proactive with our credit cards and managing our credit history. While it has been said that closing an account can inadvertently result in a lower credit score, voluntarily closing an account proactively may be a better move than having an account closed.
Those cards that are not being used should either have the credit line transferred to a new card, or cancelled to make room for new cards in the arsenal. By shuffling around credit lines to open new cards, travelers can continue to build the good will they have earned with their favorite credit card issuers, while avoiding a negative mark on their credit.
Contrary to one opinion, paying off a credit card every month does not make the cardholder a “deadbeat.” Rather, by practicing good overall credit habits, frugal travelers of all types can take advantage of their credit to continually earn points and miles to all their favorite destinations.
What healthy credit practices do you take to make sure you are sustainable in the quest to earn points and miles? Let me know your thoughts in the comments below!
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