The strategies contained in the article are not that advanced, but are very solid. The very first section “Pay your bills on time to maintain a good credit record and qualify for low rates.” DUH! Even if you are only able to pay the minimum payment, or less than the minimum payment, send the credit card something. All it takes is a couple of 30 and 60 day late payments on your credit report to plummet your credit scores. However, if you are just starting out, and have no credit, it would be worthwhile to run small balances on 2-3 credit cards, in order to build your initial credit. Always paying your credit cards off at the end of the month will not get you any substantial credit.
When I first started out, I did exactly that. Ran some small balances and began to build some credit. Beware, though, as this can be extremely dangerous for someone new to credit cards. A euphoric feeling tends to circle around the ability to get nearly anything you want without having the cash. Carefully watch what you spend and track your balances.
The section on “Don’t have “too many credit cards.” “ is a particular point I want to make. It tells not only of having too many credit cards, but also of having too large of available combined credit across all credit cards. You may think that since you are paying off your credit cards every month, that you will have a great credit score. However, when applying for other loans, the lender will evaluate your potential to pay back both the new loan, and if you maxed out all your credit cards. FDIC mentioned a number, $15,000 in available credit in their example, and I would say, if you do not have significant income (maybe $50,000+ per year) you may want to consider canceling one or more of those cards.
Their other mentioning of “Take advantage of the Internet.” is another no-brainer, but a very good recommendation. Don’t wait for that super-fantastic offer in the mail, do your own searches online, and find credit cards that offer the best rewards. Many cards offer cash back or reward miles toward travel expenses.
In closing, the strategies outlined in FDIC’s 51 Ways to Save on Loans and Credit Cards are not that complicated, but sometimes we just need to be reminded of simple, proven methods for effectively managing our financial resources. Any comments, questions? The FDIC article can be found at Summer 2007 – Special Edition: 51 Ways to Save Hundreds on Loans and Credit Cards.