Welcome to my new series – Taking Financial Advice – where I share financial or money advice I have been given and give feedback on how that worked out for me.
For years I have operated with one credit card. Discover Card with 1% cash back. This wasn’t always the case. Before aligning myself with the one card rule, I had several cards. An American Express from my college days. 2-3 store cards that I got in order to receive the in-store purchase discount and a random Visa that showed up in my mail one day.
But then I started listening to a professional money-head, probably Suze Orman, and the advice was, to have just one card and pay it off at the end of the month. So I did. And I was always pleasantly surprised to receive a credit that I could apply to my future balances one the credit reserve was large enough. I see now, while not exactly harmful advice, not stellar advice either – at least not for me.
What I did not do was research. I took some advice from someone “in the know” and reaped the rewards – or rather lack of rewards – from that advice.
What went wrong?
#1 Closing established accounts
Closing my oldest credit accounts stripped me on my history of long-term credit relationships. This is a ding on credit reports.
#2Higher credit use ratio
Also, because I only had one card, the likelihood of having an unattractive credit utilization rate was ongoing.
Now in all honesty, I was not paying pay attention to my credit reports back in the day and had never heard of FICO and had no idea what terms like Credit Utilization or “balance-to-limit-ratio” even meant. That wasn’t the money-head’s fault. I should have known or should have researched the technicalities behind the advice. This just goes to show that everything is an iceberg. The advice that floats on the top and, the information that is swimming under the surface.
#3 Sacrificing rewards opportunities
This is the one that is most disheartening. I have left so many rewards and points on the table because I thought I was taking the smarter, nobler steps of keeping just one card and paying off that card at the end of each month. The truth is, I could have still been smart, and pay my balances in full at the end of each month. But just with more cards.
The lesson for me is, listening to advice is great and necessary. There are so many resources that know or can offer more information than any one of us can know on our own in a single lifetime. The real problem was not in taking the advice but in not doing more research or understanding what my real needs were and what opportunities I could benefit from.
And when it comes to our finances, only we care the most about them.
And because I care about how I can arrange my finances for things like excellent credit scores, fun vacations and cash back, I have new cards that I LOVE and these are the rewards that I received when I signed up:
Chase Sapphire – 50,000 points (can convert to free hotel nights)
IHG – 60,000 points (about 6 free hotel nights + plus a FREE night each year on my birthday)
Southwest Rapid Rewards – 50,000 points (2 round-trip tickets to Seattle for Me and Mirror Image to visit my father)
Chase Freedom – $150 Cash Back
Barclays MasterCard – $250 Cash Back
And I still pay my bills, in full, at the end of each month so as not to pay finance or interest fees. And with these cards, as with my beloved Discover Card, I can get cash back or points/ rewards on the things I would have purchased anyway.