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(upbeat music) - [Krystalina] Hey everyone, welcome to the Guiding You Forward podcast presented by Mountain America Credit Union, where we talk about all things financial related. Today, we're talking about credit cards, and thankfully we have Jade Beckman with us. Hi, Jade. - [Jade] Hi, Krystalina. Great to be with you. - [Krystalina] What are some good habits when it comes to using a credit card? I mean, we've mentioned a couple already, right? Make sure that you're not spending more than you have in your checking account. What else do you have for us as far as good habits? - [Jade] Well, I think you said the first one, that's the most important one is, and I know we're repeating that, but I want to emphasize that, is being in control of your spending. Don't overspend on your credit card. So that's number one, maybe two and three. - [Krystalina] Okay. - [Jade] The most important things. Beyond that, I think there's some other things that we can look at. Be aware of what the terms are on your credit card. For example, a lot of those mailers that you were talking about getting, a lot of them have really great offers, right? Maybe it's 0% for the first six months-- - [Krystalina] $100, yes! - [Jade] $100 for your first charge, or spend $10,000 and we'll give you the moon types of things. So I think it's being aware of those. What happens after that? What am I signing up for after that great 0% or 3%, whatever that rate is at the beginning. Where is it going to revert to? And all that's going to be in the disclosures. They have to tell you and they have to tell you conspicuously. So it's right there to know. - [Krystalina] Okay. I have a quick example to share of this. - [Jade] Let's hear it. - [Krystalina] Okay. So when I was in college, which we're all dirt poor in college, right? I worked at a wonderful retail store, to not be named. And that's where we offered credit cards, right? In-store credit cards. You would get, as you mentioned, 50% off your purchase today if you sign up and pay for it with this card. And it was awesome. People would save a ton of money. But as I worked there longer, I realized, oh my gosh, if they don't pay this off within their grace period, their 25 days, they're paying 20 plus percent interest. That's insane. - [Jade] And that's not out of the norm either. Most of the credit cards out there are in the high teens or 20% rates. So on the front of the envelope is the 3.99% or whatever that great introductory rate is, but what is it going to revert to after that? That's really what you're signing up for. You can game that system. I mean, I'm not gonna say you can't because you certainly can, and you can game that system and use it for the introductory period and go to another card after that. You can certainly do that. To me, that takes a lot of energy and a lot of time that I'd rather be spending with my family or fishing or whatever, but you can certainly game those systems. I just think, to me, the way I'd recommend it is know what that card is going to be long-term. Because if I don't pay that off in those 25 days, like we were talking and get the 0% or not pay interest, well, now I'm going to be paying interest. And what rate am I going to be paying that interest at? And it could be, like you said, in the 20% range. - [Krystalina] Okay, interesting. So another question for you too is, when we're talking about credit card terms, isn't there a certain thing, I'm supposed to only spend 10% of my credit card limit or something like that? How does that work? - [Jade] Going back to our credit score and trying to keep our credit score as good as we possibly can. Yeah, I think a good rule of thumb is to, if you're going to carry a balance. So really, we need to be talking about carrying a balance. I'm putting something that is above and beyond my budget. That I need extra time to pay that off. I don't know. Maybe my air conditioner went out right and I don't have the savings, but I've got the credit card. I'm gonna put that $4,000 bill on my credit card and I'm going to pay that off over time. That's the type of scenario that we're talking about here. So I want to make sure that whatever balance I'm carrying is no more than, say, about 1/3 of your limit. - [Krystalina] Okay. - [Jade] So if the limit's $10,000, try to keep that balance $3,000-ish or below. - [Krystalina] Okay, okay, that's good advice. Any other good credit card habits we should be aware of? - [Jade] Yeah, I think going along the terms and then rewards, kind of marrying those two concepts. A lot of the rewards look really great, but we really need to make sure that we understand how many dollars earns a point and what the value of a point is under that rewards program. A lot of times there are things tied to travel, but it might have blackout dates, which is probably all the times that you want to go. - [Krystalina] Over spring break and fall break-- - [Jade] Spring break, fall break and anytime in the summer. But if you want to go on Tuesday afternoon and come back on Thursday, then you're good. I'm kidding. That's exaggerating. But you do need to be aware of those types of things. Hey, I'm gonna earn all these points and go to Hawaii, like we talked about, yet I find out that the blackout dates preclude when I really want to go. So I think being aware of those. Some credit card offers will have different merchant categories. So for example, they say, you earn triple points on groceries and gas, and one point on everything else. Hey, well, I can't really think that I'm going to be earning triple points on everything. It's only those certain categories that I'm going to be earning on. That doesn't make it a good or a bad offer. I'm just saying those are things that we need to be aware of so that we know what the real purpose of this, this rewards program is. - [Krystalina] Okay, awesome. So aside from rewards, obviously keeping our balances low to help our credit. Tell me a little bit about how credit cards can help prevent fraud. - [Jade] Okay, that's a great topic to talk about, Krystalina. So, if we go back and kind of compare it to the debit card. They're both a piece of plastic that are accessing something. Your debit card is accessing your checking account, your money, your deposit account. Your credit card is accessing a line of credit, a loan, in short terms. So if we think about going back to that example of debit cards and credit cards, they're both a piece of plastic that are accessing something different. The debit card is accessing our depository account, our checking account, where our money is. The credit card is accessing a line of credit or a loan, to put it simply. - [Krystalina] Yeah. - [Jade] So unfortunately, some things happen that our cards might sometimes get compromised or just because there's a lot of hackers, and people like that, that do that type of thing. So if that happens, unfortunately, if that bad thing happens, if it's my debit card that gets compromised, well, what are they accessing? What do they have access to? - [Krystalina] All my money. - [Jade] All my money. That's my checking account. If they're accessing my credit card, they're accessing not my money, but into the loan. Now, if it's fraudulent, we're going to get it back either way. So it's not like we're unprotected either way, but sometimes there is a investigation that has to happen to find out where that fraud is and get the money put back. I'm not out my money on the credit card while that happens, where I'm kind of out my money on the debit card if that happens. - [Krystalina] Okay, so that could be risky, right? Let's say I have fraud on my debit card and now suddenly I can't make my mortgage payment until I get that refund back and it takes three weeks. - [Jade] Exactly, exactly. - [Krystalina] Okay. Whereas on my credit card, I probably can be a little bit more lenient, right? - [Jade] Right. There's some of my limit that is-- - [Krystalina] Tied up. - [Jade] Kind of held or tied up for that time, but it's not my money. It's not my mortgage payment, like you said, or my grocery money. - [Krystalina] Oh my goodness. Yeah, that's terrifying. So in that scenario, it's better to use credit? - [Jade] Yeah. I would suggest that it might be, for fraud protection, credit card probably gives you a little bit of edge there. Maybe along those same lines that we're talking about. You've probably rented a car, right, before? - [Krystalina] I have rented a car. I mean, I'm finally old enough. - [Jade] Just barely. (laughing) But typically they'll put a hold on your credit card. So it's kind of that same concept. If I'm going to rent a car, I can use either one, either piece of plastic, but they're gonna put a hold on for more than just the amount of the rental for incidentals, or if I crash the car or whatever. What's being held, that's again, my checking account, my money. Whereas as the credit card, what's being held is just part of that credit line that I'm not planning to access anyway. So that's just maybe another time with some of those types of big purchases that a credit card's probably the better way to go. (uplifting music)