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hey guys credit shifu here welcome to the show and I'd say a big thanks a big welcome to all the new subscribers we've added recently in the last couple of weeks we've gone from about five thousand to twelve thousand subscribers within the space of a few weeks so thank you very much and welcome guys today we're going to be looking at six things you should never do with a credit card number one cash advances now in addition to using your credit card in a store you can actually use your credit card at an ATM in order to get cash out but this isn't really the same as getting cash from a bank account it's actually regarded by the credit card company as a short-term loan and it's seen as a pretty risky loan at that now if you think about it if you use your credit card to buy things the company can actually see which stores you're going to what categories those purchases fall into whether it's dining travel whatever I think you know they see your purchases they get an idea of your spending habits if you're using your credit card to take out cash they don't know what you're spending that cash on alright you could be a drug dealer and you're using that cash to buy drugs and then selling those drugs and using that money to pay off your credit card right they do not know if you went to a bank and said can I have a loan and you didn't tell them what that loan is for they would probably refuse your loan so the credit card companies see it as a high-risk loan and thus they're going to charge you a fee for that cash advance maybe a $10 fee just to take cash out or sometimes a percentage fee but in addition now this is the card member agreement for the Chase Sapphire Reserve look closely here for regular payments they charge interest after the payment date okay so you have like over a month to pay it back otherwise you'll get charged interest for cash advances they charge interest from the day of the transaction so that means as soon as you take that cash out you're going to be paying interest on that amount of money and that's because they do it as a high-risk lunch so they're going to charge you a lot of money throw that privilege of taking cash so I recommend never take out cash with a credit card and never use those little checks that credit card companies sometimes send you because that's the same as a cash advance number two never miss a payment so guys this kind of goes without saying you know on this channel I'm teaching you to use credit cards to your advantage not to get bogged down with debt and decrease your credit score and screw yourself over okay so I teach that you should never miss a payment now I actually advise you to pay your credit card off in full every month bring that balance right back down to zero but at a minimum you should never miss a minimum payment I'll tell you why now first of all if you miss them in on payment there's going to be a penalty charge often between twenty-five and thirty-five dollars that you can have to pay but more importantly if you miss a minimum payment that credit card company is going to report some negative information to the credit bureaus and you're going to have a missed payment on your credit report and that in turn will cause your credit score to drop so that's going to negatively affect your credit situation so that's why I advise never miss a payment and of course it's best if you can pay in full every month but in an absolute minimum you have to pay the minimum payment number three never max it out so you shouldn't max out your credit card and there's a few reasons why let's kind of illustrate this with an example so I teach that you should keep your credit utilization under 30 percent of the total amount of credit you have and that's going to have a good influence on your credit score in credit report in fact if you have a lot of credit I would advise keep it even under 10% which will even be even better for your credit score so let's say a person has two credit cards each with a thousand dollar limit in order to keep under 30 percent you could spend $300 on each card or $600 on one card and nothing on the other or 400 200 anyway you got to keep it under 30 percent right but if you max out one of those cards to a thousand you're already 50% of your overall credit utilization so you're over that 30 percent alright so maxing out credit card is bad for your credit utilization but also there's another thing credit card companies periodically may conduct reviews of you know their customers check out your financial situation perhaps your credit score has decreased a little bit because you've been carrying too much of a balance and your credit card is maxed out now if that credit card company chooses to close your account you're going to be liable to pay that balance off immediately if you don't pay it immediately they're going to send it to a collection agency and then you're going to get company coming calling you up saying you know we want to collect this debt or else bad things are going to happen to you okay so I would advise never max out your credit card always keep you know within 30% utilization for never earn rewards whilst carrying about so many credit cards earn airline miles or hotel points and stuff and that's really great and if you follow my advice of always paying off your credit card bill every month and never carrying a balance that you pay interest on those rewards going to riad up and you get a lot of value out of them but if you carry a balance you're going to be paying interest alright and so that is going to start eating away those awards and if your balance is you know reasonable you know a few thousand dollars you're going to end up paying so much interest is going to cancel out the value of those rewards totally let's look an example let's say you have the Chase Sapphire Reserve and let's say you know when you got it you had some kind of irresponsible spending and you've got a balance of $5,000 okay and each month you spend a bit more move you spend another thousand and see you up to six thousand you pay that thousand off but that still leaves a balance of five thousand that you're caring for each mark okay now instead you spend a thousand dollars a month so let's say that's twelve thousand dollars a year right that you're spending on your cut chase points for the Sapphire Reserve it's one point on everything three points on travel and dining so let's just average average that out at two points and chase points according to the points ago worth around two cents apiece okay so you're roughly getting about four percent return on your spending and so if you spend $12,000 a year four percent rewards that's going to be 480 dollars worth of rewards that you're going to get over the year and that's if you spend you know the best way possible if you transfer your points to Airlines and if you redeem for cashback you're only going to get two percent so now let's say you're carrying that $5,000 balance here's the card member agreement for the sapphire reserve you can see APR is between around 18 and 23 percent so let's just average that set twenty percent and you're carrying 5,000 so over the course of a year at 20% you're going to pay it $1,000 in interest that's over double what you're getting in rewards so that's completely cancelling out all the rules you're getting from the car there's no point getting those rewards if you're carrying that balance my advice if you do care about open up a balance transfer card like a chase slate or one of the other cards it's going to give you zero percent APR for 15 months or 18 months or a certain period of time transfer your balance over so that you can pay it off in your own time within that time limit and you're not going to pay any interest on it and then the rewards you're earning on your cheetara verb or whatever card you have are actually going to be worth it number five never forget an old card so if you have a lot of credit cards you may have some all the cards that you don't really use very often but you may use them occasionally to buy a few things the worst thing you can do is to make a purchase on an old card and then sort of put it away in a drawer and forget that you did that okay because even if you make say you bought a cup of coffee right and let's say you miss the minimum payment you're going to pay like a $35 fee from this and payment for a $4 cup of coffee all right and let's say if you've made a few hundred dollars where the purchases on it and then you forget about it that's going to be even more because once you've missed a payment then you're going to be paying interest and that mounts up I had a friend who had a Macy's store card he got the cards just because they try and push it on you when you're shopping at Macy's so he used it to buy a few things that day maybe about $200 or things and then forgot about it didn't pay it and he ended up a few months later with like a $600 bill because he had accrued fees for missing the minimum payment and then you'd also have interest etc so my advice is just at least once a month check through all of your credit card accounts if there's an app or some easy way you can do it on your phone that's even better download the app you can use a fingerprint to open it up doing about the type of password just open up once a month just go through check out all your balances make sure they're down to zero before their payment due dates number six never close all the counts now this one I've put last because when I think never it's more like never with a little star and a little small print down saying never close accounts if you want to maintain a good credit score or you're thinking of applying for a mortgage or some financial product when you need a good school because closing accounts especially your older accounts is going to decrease the average length of accounts on your credit report right so that's actually going to lower your credit score so if you are up thinking of doing something where you know you you're applying for some kind of financial product where you need a good credit score that's not a good time to close old accounts now there is an argument for closing out accounts obviously if you've never use a credit card and you know you want to close it because it's really doesn't have much use for you then you know go ahead and close it but do bear in mind that's going to affect your credit score and you certainly don't want to close several old accounts all at the same time for someone who's relatively new to the credit game so three years four years I would advise you do not close your old accounts for someone who's got a credit history more like ten years I would say doesn't matter so much if you are closing order accounts because they'll have less impact on your credit score but if you've only been doing it a few years so you won't keep your first few credit cards open because those are the ones with the longest account histories so guys those are six things that you should never do with a credit card perhaps you have some of your own ideas feel free to leave comments below tell me if there's anything I've missed as always I'm a credit guru thank you so much guys for your support and a big thank you to all the new subscribers who've joined us over last couple of weeks if you're new and you haven't subscribed yet please hit that subscribe button give this video a like we'll see you next time bye [Music]