About Credit Card necessity

What is a credit card?

A credit card is a tool that allows you to use borrowed money to pay for goods and services. It works like this: When you’re approved, the bank hands over a hunk of credit in the form of a plastic card to use at your discretion. In swiping or dipping your credit card, you’re not using your money to pay for your groceries or a new outfit. You’re using the bank’s money, which they’ll let you do on a short-term basis without incurring any interest. At the end of the month, you have to pay that mini-loan back in full or finance charges will be assessed.

Debit cards work differently. With this type of plastic, an auto draft from your checking account is occurring when you swipe your card. You’re using your own funds to pay for your items on the spot, so there’s no borrowing involved and no bill to settle at the end of the month.

Prepaid debit cards are similar to debit cards, but with a significant twist. Instead of tapping funds in your checking account, swiping a prepaid debit means drawing on a cash deposit you made onto the card; you’ve essentially paid ahead for your purchases. As with debit cards, you’re not borrowing money from a bank when you use prepaid debit.

Why it’s important to get a credit card

To the untrained eye, it might seem that debit or prepaid debit cards are a smarter way to pay. Since they don’t involve borrowing money, there’s no way to get into debt, right? That’s right, but using borrowed money responsibly is essential to building your credit profile. Having good credit will make it much easier for you to get loans on good terms in the future. It will also go a long way toward making other financial tasks stress-free. Examples of these tasks include renting an apartment and finding affordable car insurance. Aside from building credit, using a credit card as your primary form of payment plastic will also help you earn rewards and minimize fees. Usually, debit and prepaid debit don’t offer rewards programs, and prepaid debit cards are notorious for their high (and often opaque) fees.

Tips for effective credit card use

Getting a credit card is only going to help you build good credit if you use it carefully. Here are the Nerds’ top tips for the care and keeping of your card:

•Pay your bill on time every month. No exceptions!
•Pay off your charges in full every month. Credit card debt is expensive and can drag down your credit score.
•Keep the balance on your card below 30% of your available credit at all times during the month. Make a payment if you start approaching that threshold.
•Put at least six months of space between credit card applications.
•Check your credit card online at least once per week. This will help you track your spending, and could help you spot fraud fast.

•The bottom line
•Although they look and feel the same, credit cards are very different from debit and prepaid debit cards. Using a credit card responsibly is a great way to build and maintain a healthy credit profile, so be sure to get started as soon as you can.

Credit card pros and cons


•You can make a large purchase now and pay it off in smaller chunks
•Your credit card statement makes budgeting easier
•It’s easier than carrying around a wad of cash
•You can build up your credit score, which will be useful later on


•You can easily dig yourself into debt if you’re not careful about your spending
•The ease of using credit cards can cause you to overspend
•Interest rates can make even a small debt seem larger over time

Choosing a credit card

When you’re deciding which credit card to get, ask yourself one question: Will I be paying interest on my debts? If you pay your credit card balance in full and on time each month, then you won’t be charged interest. In that case, it’s worth it to get a credit card with rewards. These cards give you points, cash or airline miles every time you use them. However, rewards cards have higher interest rates — high enough to wipe out the value of the rewards you earn. That brings us to what to do if you do carry a balance (in other words, you don’t pay off your debt every month). You’ll want to minimize your interest payments, so you should pick a credit card that has a low interest rate. Your credit card is issued by a bank, like Bank of America or Chase. The bank determines your interest rate, fees and rewards, so it’s important to find a bank that offers a card you like. It’s processed on a network, like Visa or MasterCard. The network doesn’t really affect the card, except for giving you random perks like travel accident insurance. Generally, the network isn’t as important as the bank. In general, the better your credit score, the better the cards you can qualify for. The most generous rewards rates, the best perks and the lowest interest rates are available to those with excellent credit.

Interest payments and fees

Credit card companies make money in three ways:

•Interchange fees, or fees charged to the merchant every time you use your credit card
•Interest payments, from when you don’t pay off your debt in full
•Fees, like late payment or annual fees

You don’t have to worry about that first one. Interchange fees are a problem for merchants. Instead, concern yourself with interest payments and fees. If you have a rewards credit card, remember that issuers don’t give those points out of the goodness of their hearts. Most people think they’ll earn more in rewards than they pay in interest, but that’s rarely the case. If you think there’s a chance you won’t pay off your balance every month, steer clear of rewards. Credit cards charge a number of fees, from an annual fee to cash advance fees to late payment fees. Your card probably won’t have an annual fee, but make sure to make at least the minimum monthly payment on time, or you’ll be slapped with a fee, a higher interest rate and/or a lower credit score.

How to Pick the Best Travel Credit Card

Credit cards are omnipresent in modern day society. People use them to pay for everything from cars to groceries to sticks of gum. The US is a credit card loving country and you’ve probably seen all the ads for bonuses if you sign up with this or that credit card be advertised by some celebrity. With so many cards to choose from, it’s hard to know which one is actually good for travel and which one is total BS. Travel credit cards offer a great opportunity to earn free points that can be redeemed for airfares, hotels or cold hard cash. In the race to get customers, credit card issuing companies partner with various travel brands (or just simply offer their own card) that entice consumers with sign up bonuses, loyalty points, special discounts, and more. Their desire to get you, the consumer, is really your gain. By milking the system, you can get tons of free air tickets, hotel rooms, vacations, and even cash back. I’ve accumulated close to one million points through sign-up bonuses alone. I use so many points each year; it would take an entire book to just list them off to you. I am cash poor, miles rich man! All those points and miles have allowed me to travel the world on the cheap. And they can do that for you too, which is why signing up for a travel credit card is so important. It’s your gateway to free travel. So how do you pick the best travel related credit card? First, know that there is no perfect travel card – they all offer different benefits that fit different people. I use an AMEX card for booking flights (3x per dollar spent), Chase Sapphire for my everyday spending (and sometimes a Starwood card), and a different card for my business! But I have friends who only want cash back and others who only want United miles. So first know there is no one perfect card – there is only the perfect card for YOU! A huge sign-up bonus — A big sign-up bonus (after you meet the minimum spending requirement) is what jump-starts your mileage account and gets you close to a free flight (sometimes these bonuses even get you a few free flights!). Don’t sign up for a card unless it offers a high sign-up bonus. Bonuses work like this: in order to get the large bonuses, you must make either a single purchase or meet a minimum spending threshold in a certain time frame. After that, depending on the card, you can earn 1-5x points per dollar spent. For example, the Alaska Airlines card comes with a 25,000 mile bonus. To get that, you just need be approved for the card (and pay the $75 USD annual fee). You can get 50,000 points with the Citi Prestige card when you spend $3,000 USD in the first three months. On the other hand, the Starwood Preferred Guest American Express gives you 25,000 points after you spend $3,000 USD in the first 3 months. Typical card bonuses range between 25,000 to 50,000 points, though sometimes they can be as high as 100,000. That’s why cards are so great—you get an instant balance of thousands of points for very little work.

Added category spending bonus — Most credit cards offer one point for every dollar spent. However, the good credit cards will give you extra points when you shop at specific retailers, or, if it is a branded credit card, with a particular brand. This will help you earn points much more quickly. I don’t want one dollar to equal just one point. I want the ability to get two or three points every time I spend a dollar. For example, with the Chase Sapphire Preferred card you get 2x points for travel and dining at restaurants, the Chase Ink gives you 5x points for office spending, and the American Express Premier Rewards Gold card 3x points on airfare. I try to get and use cards in my day-to-day spending that give me more than just one mile per dollar spent.

Low spending minimum — Unfortunately, in order to get the great bonuses these cards offer, there is usually a required spending minimum. While there are ways to fake your spending, it’s best to be able to get the bonus using normal day-to-day spending. I typically sign up for cards with a minimum spending requirement of $1,000–3,000 USD in a three- to six-month period. My favorite spending minimums are the offers that require you to make one purchase in order to unlock the bonus! While you shouldn’t necessarily avoid high-minimum spending cards as they have substantial rewards, it’s a good idea to start small because you don’t want to get stuck with so many cards that you can’t meet the minimum spends. Once you get the card, you can’t reapply for the card, so don’t go overboard and miss out on the sign-up bonus.
That’s why having a goal and starting small is important with credit cards. You don’t want to dive into the deep end before you’re ready because one mistake in this game can leave you stuck with spending requirements you can’t meet (and bonus points you can’t earn)! It’s easy to go crazy and sign up for 10 cards in a short amount of time. But then to get the bonus points, you might find yourself stuck with having to spend $10,000-30,000 USD in a very short period of time. That’s a lot of pressure.
Managing your ability to meet the minimum spending requirements is key because if you are spending more money than you usually do just to get these points, the points are no longer free. Only spend what you normally would and not a penny more. If you’re looking for ways to meet your minimum spending requirements to “fake” your spending, there are plenty of creative ways to become a travel hacker.

Have special perks – All of these travel credit cards offer great perks. Many will give you special elite loyalty status or other extra perks. I want cards without foreign transaction fees, free checked baggage, priority boarding, free nights, and much more. It’s not just about just getting miles; it’s about what else comes with the card that makes my life easier!

Annual fees – No one likes paying annual fees for credit cards. Many of the fees for company branded credit cards range from $50-$95 per year. I pay an annual fee. For those who travel a lot and fly a lot, I think it is worth it to get a card with a fee. Fee-based cards tend to give you a better rewards scheme, where you can accumulate points faster, get better access to services and special offers, and get better travel protection. With these cards, I have saved more money on travel than I have spent on fees.

Foreign transaction fees

The majority of credit cards charge a 3% fee when you use them overseas. Credit cards are great to use because you get a good exchange rate from them but if you are paying a fee every time you use the card, then it doesn’t become as good. The simplest card for avoiding foreign fees is the Capital One Venture Card. There is no yearly fee but there’s also no rewards structure (OK, there is but it sucks. Here’s why). This card is for people who want simplicity and don’t care about points (though that’s just crazy talk). However, if you decide you want points and see the value in the yearly fee (which is usually pretty low. See above), the best cards for avoiding overseas fees are the Chase Sapphire Preferred, Starwood American Express, any airline branded card, Barclay’s Arrival Plus, or Chase Ink. They are way better than the Capital One card but everyone’s spending needs are different, right!

Will This Hurt My Credit?

While it’s true that “churning and burning” i.e. opening an closing a lot of credit cards at once can hurt your credit, applying for a few credit cards over a period of time won’t kill your credit score. Your credit score will slightly dip every time there is an inquiry into whether that is a credit card or home loan or car loan. It’s how the system is set up. But so long as you space out your applications and maintain good credit, you won’t find any long term damages to your credit. Your credit rating rises over time as long as you maintain it, you aren’t going to have a bank officer tell you years from now “sorry, because you cancelled three credit cards in 2012, your loan is denied.” I once cancelled 4 credit cards in one day and the impact on my score? Nothing.

What If You Have Poor Credit?

Many travel rewards cards are only available to those with a high credit score, and if you have a low score (650 or less), you may find yourself being declined often and limited in your options. There’s no magic bullet to suddenly fixing your credit score. If you have a low credit score, you need build it up. There are ways to do that and point-earning cards that can get you there.
First, here are five ways to improve your credit:

1.Go to AnnualCreditReport.com and get a free copy of your credit report. This site lets you know what your credit score is so you can see what areas you need to work on.
2.Dispute any incorrect information on your credit report with the credit reporting agencies—Experian, Equifax, and Transunion. Don’t let mistakes bring you down.
3.Get a secured credit card. These cards require you to put down a cash deposit, think of it like a pre-paid credit card (or a credit-card-in-training). If you decide to put $500 USD in your secured credit card, you can use up to $500 USD each month and then pay it off. Spending and paying off your balance in full each month is a good way to build up your trustworthiness. A good secured card will have automatic reporting to the three major credit bureaus. This will help you build good credit history and increase your score. For example, HSBC offers a secured Visa card with a $0 annual fee for the first year and $200 USD minimum deposit. Check with your local bank or any credit card issue to see what they offer and get it. Overtime, you can raise the limit and this will raise your score allowing you to move to a regular credit card.
4.Become an additional cardholder (authorized user) on the card of someone else with good credit—you will inherit their score. It’s like they’re vouching for you. This can instantly improve your score. Warning: Your missed payments will also appear on their account, so don’t add someone or have someone add you if they aren’t on top of their finances. This works both ways
5.Pay all current bills on time and don’t get into more debt (and move your current debt to low- or zero-interest cards. I love the Discover and Chase Slate cards for this.

Credit scores improve over time but they don’t take forever….and you don’t need to be debt free to make it happen. A few smart months of money management and you’ll see your score rise. For those with low or no credit, Capital One, Barclays, and Discover all offer cards for people with little or bad credit. Moreover, ask your local credit union (or call one of the banks above) if they have any prepaid cards you can get, call up the major banks or walk into a branch and ask the teller. All financial institutions have products for people with poor credit. Get them and constantly work at it. If you’re passive, it won’t improve, but if you push the banks and prove you’re not a risk, you’ll soon be getting the good cards that can get you the good bonuses!

You may not get the best deals or cards right away, but you will eventually. It just takes time.

Which Credit Card Should You Get?

With so many credit cards to choose from, which ones do you pick? Well, the short answer is: all of them. Grab as many as you can. Why put a limit on how many points you can get? But that being said, when you are just beginning to learn this stuff, you should start off with the following question:

What is Your Goal?

Are you interested in loyalty to a brand, free rewards, or avoiding fees? Do you want to milk the rewards and bonus system to get free flights or do you just want a card that won’t charge you a fee for using it at that restaurant in Brazil? Is elite status the most important perk for you? For example, if you’re a loyal flier with American Airlines, the best cards to start off with would be the Citi American AAdvantage card (50,000 point sign-up bonus) and the Starwood American Express card (25,000 sign-up bonus plus 20% transfer bonus that you can use with your AA account). If you just want points to spend wherever you choose, get the Chase or American Express cards because you can use their points with a variety of travel companies (I will discuss this more when I talk about point systems and redemption in later chapters). They each have their own rewards programs (Chase Ultimate Rewards and American Express Membership Rewards), and points can be transferred to multiple airline or hotel partners and used to book travel directly through their sites. Just want free hotel rooms? Sign up for hotel cards. By first focusing on what you want, you can maximize your short-term goals and get the hang of travel hacking. For example, I tend to avoid hotel cards since I rarely stay in hotels. I dislike Hilton and Marriott and would rather focus on getting points related to Starwood (I prefer their hotels) or miles for flying. So unless there is an excellent sign-up bonus for a certain card, I concentrate my efforts on what matters most to me: using cards that get me airline miles or that have good transfer bonuses to airline programs. There is always a card that will help you get there but without starting with a goal, you’ll be too spread out. When you start using travel rewards credit cards, focus on the couple that help you reach your goal and then expand from there. This keeps way you’ll never run out of cards and always flush in frequent flier points and traveling for free. When you start out, you don’t want to spread yourself thin, especially if you’re a low spender. Stick with a couple of cards that help you reach your travel goals. Remember, the card that gets you to your travel goal is the best travel credit card to get. It all comes down to that simple fact!


•Starwood Card from American Express (This is my favorite rewards card)
•Chase Sapphire Preferred (My second favorite card)
•American Express Premier Rewards Gold Card (3x points on flights)
•Chase Ink Bold (Best business card)
•Citi Prestige/Premier (Great perks and transfer partners)
•Barclaycard Arrival Plus World MasterCard

How to Get Free Flights and Hotels using Travel credit card

Want to fully maximize your travel credit cards and have them work for you? All those reward points can be point to getting flights and hotel rooms – for free (or insanely discounted). From taking your family to Europe, flying first class, to sleeping in an overwater bungalow in Maldives – it’s all possible. Money is the number one reason why people don’t travel more and this book shows you how to take money out of the equation. It will teach you how to master frequent flier and hotel loyalty programs and use those system to gain hundreds of thousands of points per year before even stepping foot on an airplane or in a hotel prior. The strategies in this book are what allows me to travel so often on a budget and will get you out of your house faster, cheaper, and in comfort…..because there’s nothing like starting your trip in a first class suite that only cost $10!