The world of personal finance is full of rules for using credit cards, and for the most part, it’s good advice. I would never object to paying your credit card in full each month, paying on time, or only charging what you can afford.
Rules like these are smart for everyone, but there are others that aren’t quite so set in stone. I found that there are a few that I break all the time. They’ve all worked well for me, and depending on your situation and credit card goals, they may work for you as well. Here are the credit card rules I broke.
1. Don’t ask for too many credit cards
I’m what you might call a credit card enthusiast. I have applied and been approved for dozens of top credit cards over the years.
The reason I do this is simple. You can get many benefits from different credit cards, including rewards, travel benefits, and my favorite sign-up bonuses that you earn for reaching a minimum spend. If a credit card company is going to pay me to open a card and use it for my regular bills, I consider it free money.
However, there are risks in doing so. Applying for multiple credit cards in a short period of time can be detrimental to obtaining credit. And when you have multiple credit cards, you end up with more payments to manage, so it’s easier to accidentally miss one or overspend and end up in credit card debt.
You can benefit from using multiple credit cards, but I recommend taking it easy. There’s no rush, so you can gradually add to your portfolio as you find new cards you like.
2. Use your cards regularly so that the card issuer does not close them
This is the one rule I see all the time that has never been my experience. Of all the credit cards I’ve had, I can only think of a few that have been canceled for inactivity. It took over a year of inactivity in each case, and each card issuer let me know ahead of time via email that I had to use the card if I didn’t want it cancelled.
It is certainly possible that unused credit cards will be cancelled. My philosophy is that the credit cards I care about are the ones I use regularly. If a credit card company cancels a card that I wasn’t using anyway, it’s not a big loss.
I think a good adjustment to this rule is to make sure you use all the credit cards you want to keep. It will be easy if you stick to cards that you love and that fit your lifestyle and spending habits.
3. Know the APR of your credit card
If you asked me about my credit card APRs, I doubt I would get any of them right. The good thing about credit cards is that if you pay in full every month, the interest rate doesn’t matter because you don’t pay any interest. In most cases, this is also the best way to use credit cards.
There are a few situations where it is important to know your credit card interest rate details. If you’re paying off credit card debt spread across multiple cards, interest rates are a way to decide which card to pay off first. Paying off the card with the highest interest rate first is known as the debt avalanche method, and it’s the fastest and cheapest way to get out of debt.
If you need to carry a balance on one of your credit cards, it makes sense to check the APRs and choose the card with the lowest rate. However, 0% APR credit cards are the best option here. They offer 0% interest for an introductory period, and some offers last for a year or more.
4. Be selective about credit cards with annual fees
Credit cards with annual fees have a bit of a bad rap. Experts always recommend that you be careful with annual fee cards, as these add to your bills.
While there are great credit cards with no annual fee, cards with an annual fee generally offer a lot more benefits. If you can use these benefits, you’ll likely get a lot more value from the card than you spend on fees.
For example, there are several popular hotel credit cards with annual fees in the $100 range. Many of them include a free night certificate, and it can be redeemed for a night that would otherwise cost a lot more than $100. If you stay at this hotel every year, a free night certificate alone is enough to make the annual fee worthwhile.
Also remember that opening a credit card is not a lifetime commitment. If you think you’re not getting what you pay for, you can always downgrade the credit card to a card with no annual fee or cancel it altogether.
None of these credit card rules are bad, they just don’t work for me. Credit cards can be a very useful financial tool, and to get the most out of them, you need to find the rules that work best for you.
Check out The Ascent’s best credit cards for 2022
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