Money Management Tips and Finance Basics

Credit Cards 101

Know what you're getting into when you swipe that little piece of plastic.

By Alexandra Kay
Wallet with credit cardsJames Baigrie

Rewards Cards, Balance Distribution

Q. What should I consider when weighing a card with mileage points or other incentives against another card?
A. People love the thought of racking up points, but the points are worthless if you don’t use them. Before signing up for a rewards card, check the limits of the program. Some restrict the stores where you can shop and receive points; others cap the number of points you can accumulate. Look at the interest rate, too, since rewards cards often carry higher rates and, occasionally, fees.
 
Your best bet is to keep a rewards card for smaller, everyday purchases that you’ll pay off in full each month and a low-interest card in case you need to carry a balance.
 
 Q. Is it better to keep a big balance on one card or spread the balances over several cards?
A. You’re usually better off keeping smaller balances on a few cards. “If you have just one card and it’s almost maxed out, that suggests (to your bank and other potential lenders) that you’re having trouble getting credit,” says Robert D. Manning, Ph.D., director of the Center for Consumer Financial Services, at the Rochester Institute of Technology, in New York.
 
The exception? If one card has a particularly low interest rate, you might want to switch all your balances to that one to save money.
 
Read More About:Money

Related Content

Illustration of man and woman talking

3 Ways to Cut Your IRS Debt

If you're having trouble paying your taxes or want to fight late fees, these tips can help you negotiate with the IRS.

What do you think about this article? Share your own solutions and ideas

View Earlier Comments
Advertisement

Quick Tip

Illustration of suitcases

Packing for a family vacation? Travel versions of favorite games won’t crowd suitcases, and playing them will keep kids from begging to watch TV at night. Get more tips.