Playing With Snakes (Effect of Additional Credit Cards on Credit Score)

[myrdale]

While in theory I am 100% on board with Dave about no credit cards, I have been dabbling with them for years.

Historically I've only had two. I have a HomeDepot store card $10,000 limit (almost 18 years old), and a Lowes store card (5 years), again $10,000. It is seldom either of these cards sees more than $200 charged to them in any one month, and they are both paid in full each billing cycle. As my only two active lines of credit, my fico score stays around 750, with the only ding being limited accounts.

I had previously considered applying for a card from Chase, but talked myself out of it each time. After a trip to Chicago, it occurred to me there could be some value, mainly in convenience, in having a second method of payment other than my single debt card when traveling.

After a couple failed attempts at applying for Chase's Sapphire Preferred card (they thought it was a fraudulent application) I was finally approved. It does come with a $95 annual fee.

For the first three months I simply put all of my purchases on it with out making any additional purchases to qualify for their welcoming offer based on spending around $5k. Depending on how you look at their points system when I redeem them it will be around $500-$800 (its confusing on purpose). There's an annual $50 hotel credit. Assuming I take full advantage of both, the card should pay for itself for 10 years.

Now 6 months in, I checked my score last night. The two scores listed on Credit Karma had both reached 800.

There are schemes using three separate Chase cards to max points. Flex, Freedom, & Sapphire Preferred (or Reserve). I'm not so much sold on that. But the Flex and Freedom have no annual cost. I applied for the Freedom last night. One of it's gimmicks is extra points for purchases at pharmacies. Now that I have an HSA I figured that might be a good way to track all of my medical cost by putting them all on the Freedom card.

Long term, I'll get the Flex card to have all three. I plan to request a limit increase on the Sapphire Preferred in the near future. I'd like to see it at +$10,000.

The HomeDepot card is garbage as far as offers go. No payments for 2 years is pointless for me and 10% off offers only seem to be for purchases of $300 or more (I found out when I spent $280 on an air compressor and they didn't accept the coupon since it wasn't >$300). The Lowes card is 5% off most all purchases, big woop. I am on the fence if I will keep them open long term or not.

I'll post how the score changes in the future based off if I do get the third card and if I cancel the two store cards.

At least it is a couple of data points for anyone interested how these things impact your score.

And to Dave's point, no one ever got to be a millionaire based off their points =P

[ua_guy]

Yep, it's a dumb game but credit card transaction fees and rewards are baked into the price of goods in general, so why not claim your share. Cards offer some payment security and a lot of convenience for fairly minimal cost.

Most card issuers offer you free Fico 9 score viewing. When you have excellent credit, a credit score should mean nothing and the little ebbs and flows are ignorable. There are no awards for an 850 versus an 800, and you already qualify for best rates and terms around 750. Why do I bring up viewing your score through your issuing bank-- because a site like Credit Karma is actually ingesting all the data on your credit report for its own marketing purposes and profit, that's how they offer their services for free. If you're paying for monitoring, the bureaus also offer it directly.

You can obtain your credit report (absent of your Fico score) through each of the 3 credit bureaus for free once per year. They already have your data so getting your credit report through them is pretty safe. It's also a good opportunity to lock your credit file with each bureau if you have no planned credit applications. The goal there is to prevent a thief with stolen PII from applying for credit in your name.

Right now I carry 4 cards. Two Amex of different flavors, one is shared/household and the other is my personal card. And two visa's, one for when a merchant doesn't take Amex and the other is air-gapped from wallets and mobile devices as a backup card. The rewards (we need to stop calling them rewards, pittance is more fitting) are best through Amex, not surprisingly, they have the highest transaction fees. I loathe points games and I don't travel with enough frequency to justify pittance programs based on travel perks so cash back has been a great option.

If by Dave you mean Ramsey, I think his advice is wrong for the level of most of the senior finance enthusiasts who chat on this board. No credit cards is good advice for people who are disciplining themselves after debt accumulation and building financial skill. Cards are integral to modern and safe transactions and the financially savvy spend on them like they would if they were spending their hard earned cash.

[Drake3287]

How does any adult not have a Visa or Master Card? Do you simply use your ATM card as a credit card for things like travel, online purchases and emergencies? Credit cards are almost required in today's world, the person just needs to be able to manage it correctly not to mention trust themselves. Having a handful of Visa credit cards myself, I haven't spent a cent on finance charges in 20 years let alone pay an annual fee. To many great free cards out there for that. I literally pay for everything, and I mean everything by credit card and simply pay it in full each month. In return I easily get $3,000 back each year in cash rewards. I'm guessing most people in the 800 Club all use credit cards.

[myrdale]

How does any adult not have a Visa or Master Card?

The debt card issued by my bank is a Visa card. 99% of all my purchases (daily expenses, online, travel, emergencies) are paid in cash with the debt card.

I struggle to understand how you're getting $3,000 back each year unless you're spending around +$200,000 annually.

[myrdale]

Yep, it's a dumb game but credit card transaction fees and rewards are baked into the price of goods in general, so why not claim your share. Cards offer some payment security and a lot of convenience for fairly minimal cost.

This is how I feel in general about it being a dumb game. My understanding of debt cards though is you still have 100% fraud protection, but you of course have to keep on top of it. So long as you find an issue in the first 30 days I think your fine, but after some time, 90 days or so good luck with your bank.

because a site like Credit Karma is actually ingesting all the data on your credit report for its own marketing purposes and profit, that's how they offer their services for free. If you're paying for monitoring, the bureaus also offer it directly.

Credit Karma is just the easiest method I've seen. Log in and there the numbers are.

It's also a good opportunity to lock your credit file with each bureau if you have no planned credit applications. The goal there is to prevent a thief with stolen PII from applying for credit in your name.

I've been through identity theft before. As for stolen PII, running my email through https://haveibeenpwned.com/ list at least 12 data breaches including home address, email, phone.

The rewards (we need to stop calling them rewards, pittance is more fitting) are best through Amex, not surprisingly, they have the highest transaction fees. I loathe points games and I don't travel with enough frequency to justify pittance programs based on travel perks so cash back has been a great option.

I don't travel so much either. With caving its all day trips for the most part, or I'm sleeping in the back of the truck at a trail head. Hopefully over the next couple of years I'll do more traveling for scuba diving.

If by Dave you mean Ramsey, I think his advice is wrong for the level of most of the senior finance enthusiasts who chat on this board.

Yes, but his message is a one size fits all.

[ua_guy]

This is how I feel in general about it being a dumb game. My understanding of debt cards though is you still have 100% fraud protection, but you of course have to keep on top of it. So long as you find an issue in the first 30 days I think your fine, but after some time, 90 days or so good luck with your bank.

Debit cards do have fraud protection, but once the money is pulled out, it's pulled out. It's real money, yours, and the bank has to put it back--on their timeline. The card gets shut off and things are on hold until things get sorted and you may need a new account number if that one is linked to direct deposit or other institutions. You can see where relying on this as a single payment method also tied to your ability to potentially withdraw actual cash from a bank is riskier than using a credit card which is gapped from your checking/savings. A card is a card which is why I've never understood why people would want to use a debit card instead of a credit card if they are financially disciplined. What is the advantage of a debit card, again?

This is the reason I carry multiple credit cards. If one gets burned I'm not stranded. Fraud detection can trip for all sorts of reasons on any card.

My debit card is gapped from my wallet and it's never used as a payment method. It gets used for withdrawing cash, only. Because it is cash. You can make the argument of having a separate checking account with a debit card so it's gapped from your primary account, but you're still missing out on bigger pittances from the bank for using a card (rewards). When cash back accumulates, I burn it off as a statement credit at the end of the month.

That's where I struggle with Ramsey. If the advice doesn't fit because his advice is one-size-fits-all, don't wear it.

[Fishindude77]

We buy a lot of stuff with cash and I still pay a lot of bills via snail mail and checks. Typically just use credit cards where cash is unhandy such as the gas pump, internet orders, etc.
We keep two cards in case one gets compromised while traveling. One card pays 2% back on all purchases and the other pays some points, neither of which is a big factor in our lives.

Protection against fraud is a great reason to use a credit card -vs- debit card. We've been compromised several times and never got stuck with any of the fraudulent charges.
Don't even have a debit card.

[myrdale]

We buy a lot of stuff with cash and I still pay a lot of bills via snail mail and checks.

Same here.

The only reason I've switched to e-pay for several of my bills (electric, cable, phone) is because for a 6 month period over the last couple of years, the United States Postal Service got so bad here in Georgia, I would routinely receive bills AFTER the due date. Honestly I dislike the hassle and would prefer to continue cutting checks.

[ua_guy]

I avoid having to pay anything by mail specifically for the vulnerability it introduces. Same with writing checks. I do not trust the USPS at all these days.

For a business to send a single paper statement/balance due notification to a customer, it can run $5 or more for a single communication. When all the systems, contracts, and labor are added up to handle paper remittance and mail communications, businesses stand to save a big chunk of money by one, going paperless, and two, pushing electronic payments with paperless communications. Mail and statement costs are passed directly to we the customers in the price of goods/services. Electronic transaction fees contribute to overhead too, but electronic remittance and payment posting saves businesses a lot of time/money.

[AJSimon]

How does any adult not have a Visa or Master Card? Do you simply use your ATM card as a credit card for things like travel, online purchases and emergencies? Credit cards are almost required in today's world, the person just needs to be able to manage it correctly not to mention trust themselves. Having a handful of Visa credit cards myself, I haven't spent a cent on finance charges in 20 years let alone pay an annual fee. To many great free cards out there for that. I literally pay for everything, and I mean everything by credit card and simply pay it in full each month. In return I easily get $3,000 back each year in cash rewards. I'm guessing most people in the 800 Club all use credit cards.

I'm 45 - never had a credit card, only ever a debit card. I book flights and hotels without any issues. I've never needed a rental car, so I can't speak to that, but my understanding is that most rental agencies might insist on placing a hold of a few hundred dollars (against what they end up charging you). Not ideal, but having money in your checking account makes it a non-issue. And if you don't have a money in your account, I'm not sure one ought to be monkeying around with credit cards, but that's JMI.

[myrdale]

As a minor update, my application for the second Chase card was flagged as another fraudulent attempt. Again I had to speak to an agent over the phone to confirm my identity. For the first card I thought it was reasonable as I wasn't a customer. Now with 6 months of activity, and that I clicked the application while logged onto my account I am surprised it was flagged again. I thought it was interesting they gave this card a $10k limit, while the first card was issued with only $5k.

[LivingAlmostLarge]

because you froze your credit?