Time to dive into credit cards on Your Money Playbook. This week, Lynne Jarman-Johnson sits down with Andrew Long at our Downtown Kalamazoo office to discuss credit cards. From types of cards to automatic transfers and building credit, they cover it all!

0:00:04.9 Lynne Jarman-Johnson: Hey, welcome in. It’s Your Money Playbook. I’m Lynne Jarman-Johnson with Consumers Credit Union. And we are here live on location in downtown Kalamazoo with Coach Andrew. We’ve got a great topic today, all about credit cards. But before we do that, we’ve got a great call. Let’s listen in.

 

0:00:13.4 Coach Andrew: Let’s do it.

 

0:00:22.0 Alyssa [CALLER]: Hi, this is Alyssa. I’m 21 and unfortunately my parents keep bugging me about getting a credit card. So it’s kind of annoying because I actually got one when I was 18 at a box store. But the problem is I low-key lost that card a while ago and I haven’t thought much about it since. I wasn’t really worried about it, but now that I’m hearing more about credit scores and how they work, especially if you’re planning on getting a car someday, which I do. So basically, long story short, does losing that card hurt my credit? Should I get a new one? How do I know if it was closed down or if somebody used it? I just don’t want to mess this up, especially since I’m only 21. So any advice would be great. Thank you so much. I’m looking forward to hearing from you.

 

0:01:03.5 LJJ: Wow, Alyssa’s got a lot to unpack there, Andrew.

 

0:01:07.8 Coach A: She does.

 

0:01:08.4 LJJ: I’m really excited to get into this topic because it’s so important for you and your credit score. And let’s listen in on Katie. She’s our coach here at Consumers. We’ve got a little video to watch first.

 

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0:01:18.2 Coach Katie: Just got your first credit card? That’s exciting. Let’s learn how to use it wisely. Step one, keep your spending low. If your card has a $1,000 limit, try to spend no more than $300. That’s called credit utilization. And why does that matter? Because using less than 30% of your limit shows you’re responsible and can help your credit score go up. Step two, use your card for one regular thing like gas, groceries or pet food. It’s easier to manage and helps you stay on budget. Step three, track your spending. Every time you use your card, move that same amount into a savings account. That way you’re ready when the bill comes. And when it does come, pay it in full. Want to learn more? Let us know. Consumers, we’re your team to count on.

 

0:02:06.2 LJJ: Great advice about credit cards. So Alyssa in her call said that her parents are kind of bugging her, pushing her to get a credit card. There’s a reason why, and I’m sure it has to do with credit score. Andrew, what is a credit score? Why is it important?

 

0:02:20.5 Coach A: Yeah, a credit score in its simplest terms is showing how, on a scale, up to 850, how responsible of a borrower you are. So making sure that if you say you spend something on a credit card that you actually pay it back and you pay it back on time. So it shows a couple good things. It shows responsible borrowing and on-time monthly management.

 

0:02:44.8 LJJ: Now, if you have a really good credit score, what does that mean when you’re going to buy a car or a home?

 

0:02:51.5 Coach A: Yeah, a really good credit score can help you get some great rates when you’re looking at a new car, you’re looking to get into your first, second or even third home, that’s going to help you get some great deals on interest rates.

 

0:03:03.8 LJJ: And here’s what’s important. When you say interest rates, that equals money.

 

0:03:06.4 Coach A: It does.

 

0:03:09.0 LJJ: When we talk about credit cards, they are so important for so many reasons, which we’re going to get into. But she mentioned a lost credit card and can that impact her credit? Let’s delve into that.

 

0:03:21.8 Coach A: Well, thankfully, Lynne, a lost credit card does not impact your credit score. So, Alyssa, don’t worry, you’re okay in that aspect. But what we do want to do is make sure we get that card closed out. We don’t want any fraudulent activity happening on that card which could hurt her in the future.

 

0:03:40.3 LJJ: So if it’s lost, and tell me the difference between closing a card out, which could impact, or just finding out if the card is being used and can you turn it off?

 

0:03:50.9 Coach A: There’s a difference between having an account closed out and a card closed out. The card being closed out will not impact your credit score. We’re just going to get you new credit card numbers that way you can use them safely. But if you close out the actual line of credit, that’s where the score could be impacted.

 

0:04:10.5 LJJ: This was a card that she said came from a box store. So how important and how can she find, A, the card, and is there any activity on it? Somebody could be using it?

 

0:04:22.8 Coach A: Yeah, you would definitely want to go to the box store that you got the card from. Another good way, since you are a member here at Consumers Credit Union, is through our app. We have this great tool called SavvyMoney. On SavvyMoney, you can check your credit score for free. It’s a soft pull, which doesn’t ever harm your credit score. And you can check and see if there’s been any activity on that credit card at all.

 

0:04:48.0 LJJ: And Alyssa, SavvyMoney sits right in online banking. It’s so easy. You mentioned it’s complimentary. It’s right there to look at at any time.

 

0:04:55.8 Coach A: It doesn’t hurt you at all. It’s a free service and it really helps you to know what your credit score looks like, Lynne.

 

0:05:02.4 LJJ: And why is it important? Alyssa, she wants another credit card, she’s thinking. Is that important to have maybe more than one credit card and why? And how often should you use it?

 

0:05:13.4 Coach A: Yeah, looking down the road, especially if she’s looking to get a car or a home in the future, you want a good credit score. You want to show lenders like us here at Consumers that you are a responsible borrower, that you can use part of the card, kind of like Katie was talking about, and pay it back in a timely manner. Make sure you make your payments in full and on time.

 

0:05:35.2 LJJ: Absolutely critical component. I like the fact of using it consistently and then making sure that you’re watching how you’re budgeting. But man, what a great way then to all of a sudden see that credit score tick up every single month.

 

0:05:49.5 Coach A: It’s great, especially when it gets you to be able to achieve your financial goals of getting a car or getting a house in the future. That’s one thing I love about being here at Consumers is being able to see people go from that very first credit card, just like Alyssa, all the way to a car and a house and get that dream house that they’ve always wanted.

 

0:06:09.0 LJJ: And some people are really leery about credit cards because you hear the absolute disasters of somebody who will find out, oh my gosh, this card’s lost. All of a sudden someone might have taken it and racked up as much as they could on it. So that’s a fraud concern. Then there’s the concern about just getting in above your head with credit and getting those sleepless nights.

 

0:06:32.2 Coach A: Yes, absolutely. It’s important to make sure to spend what you’re able to pay off at that time. That way you don’t overspend and get yourself into financial trouble.

 

0:06:42.0 LJJ: Okay, now let’s talk about something that’s really important. The minute she said box store, that could be a high-interest rate card comparatively to going to Consumers, coming on in and finding out what’s the best rate that you can have on a credit card versus, oh my gosh, I now am paying so much in interest and it’s really freaking me out.

 

0:07:02.7 Coach A: Absolutely. We’ve got two different options here at Consumers, depending on your goal. We have a cashback card that pays you cashback on everything that you spend regardless of category, which is super nice because some of those big box stores, it’s only getting cashback on those stores specifically. The second card we have is a low-rate card. So especially if you want to make sure that you’re paying less in interest, that low-rate card is going to be great in comparison to those big box stores.

 

0:07:31.1 LJJ: And you had mentioned somebody who might pay late as an example. What can happen to that interest rate if all of a sudden you have gotten yourself into a situation where you didn’t pay on time maybe two times in a row?

 

0:07:44.6 Coach A: Yeah, you can see that interest rate go up and it’s a negative mark on your credit report. So if you come see us here at Consumers and we do a hard pull on your credit, we’re going to see those missed payments and we’re going to ask you what caused that. But it’s also a good spot for us as a good coaching tool so that we can help you make sure to make those on-time payments each and every month.

 

0:08:07.0 LJJ: The other thing, Andrew, that we’ve got that is so simple, it’s almost a set it and forget it. And a lot of times your credit cards will have this too that’ll say, do you want to make sure that you make a minimum payment no matter what? And that way you’re not forgetting to make a payment. But we like it if you pay on time full. Why is that?

 

0:08:27.3 Coach A: Yes. So auto transfers are going to help you because life gets busy. I get it. I have a newborn at home. Auto transfers help me out a lot. So that makes sure to cover the minimum balance, that way you don’t have a late payment. Ideally, like you said, we would want to pay that full balance off so that you don’t get charged any extra interest. Puts you in a good financial spot.

 

0:08:49.4 LJJ: All right, Coach Andrew, let’s get your three tips for this playbook to get a credit card, use it wisely.

 

0:08:56.5 Coach A: Yes. Tip number one, talk to somebody like us here at Consumers. That is going to help you get in a good financial spot so that we can choose which card is right for you. Now, tip number two, spend wisely. Make sure that you don’t spend more than what you can pay back. Tip number three, keep good writing, whether it’s checking your statements online, or if you get statements in the mail, make sure you keep a good tab on what’s happening, that way in case a fraudulent transaction pops up, you can catch it right away.

 

0:09:31.4 LJJ: I’m going to say tip four, make sure you sign up for SavvyMoney.

 

0:09:33.9 Coach A: SavvyMoney.

 

0:09:36.4 LJJ: It is really savvy. Hey, thank you so much, Coach Andrew. I’d like to thank Coach Katie, and Alyssa, thank you so much for your call, because it’s callers like you that help us make sure we answer the questions that are so important. If you have a question that you would like answered, we’ve got the coaches. The number to call is 269-213-3360. It’s Your Money Playbook.

 

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