A credit card might be one of your best financial tools.
When it comes to credit, there’s no real way around it –– you need it. From applying for an apartment to buying a car (unless you’re paying cash), to sometimes even getting your utilities turned on, you’re likely to need some form of credit to help you get ahead in the United States.
In this solo episode, I’m guiding you through some of the most commonly asked questions we get about credit cards, including:
- How do I choose the best credit card?
- How do I choose the right “rewards” for myself?
- How do I use a credit card responsibly?
Additional resources:
Our Credit Card Recomendations
Episode: What Credit Card Companies Don’t Want You to Know with Vrinda Gupta
How to Build Credit Using Credit Cards
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Transcript:
Tori Dunlap:
On today’s episode, we are talking all about credit cards, what they are, how to use them responsibly, how to find the one that’s right for you, and yeah, I talk some shit about Dave Ramsey. Let’s go.
Hello Financial feminists. Welcome back to the show. I’m excited to see you as always. I hope you’re doing well. We are talking all about credit cards today on the show, and if you have been following us for a while, you know that I’m a big fan of credit cards. In fact, I think they’re one of the best financial tools at our disposal to build our credit, make sure that we are setting ourselves up well in our financial lives, but also because you can get free shit with them and who doesn’t like some free shit? Now, a lot of people here, Tori, your financial expert, why do you recommend credit cards?
I’ve been listening to people like you who must not be named, Dave Ramsey, or I have just heard that credit cards are really, really bad, that they’re going to get me into debt. They’re going to prevent me from being able to progress financially in my life and they’re really, really dangerous. And maybe you’ve grown up with parents or family that has viewed credit cards in this way that they are dangerous, they are slippery slopes and you should never touch them under any circumstances. But I have to tell you as a multimillionaire, as a personal finance expert, I love credit cards and while the advice that credit cards are dangerous and bad, it’s well-meaning, it’s trying to prevent you from going into debt, it does not treat you like an adult. Dave Ramsey comes on and talks about how credit cards and credit scores are I love debt scores and that is completely bullshit advice.
He basically tells us that we don’t need a credit score, that we shouldn’t bother trying to build it, and I don’t know what reality he lives in because you need a credit score to do almost anything. You want to buy a house? You need a credit score. You want to get a new car? You need a credit score. Sometimes you even just try to get a new apartment or even sometimes a job, they’re going to check your credit score. The problem with not actually investing in increasing our credit score is we are not setting ourselves up for success long-term and a credit card is the best tool to build your credit as long as you use it responsibly. I believe I say this in the episode and I’m going to say it again right now. Credit cards are like a knife. You can cut yourself if you mishandle a knife, you can also make yourself dinner, right?
Knives are a necessary part of our life and our existence, and it’s the same thing with credit cards. I am your personal finance expert that’s not just a regular mom, but is a cool mom and is going to tell you that credit cards are an incredibly powerful tool to build your credit to level up your financial life, but to also protect yourself. We just had an incredible episode with Brian Kelly who runs The Points Guy and we talked about how credit cards can almost be used as a secondary emergency fund. So we talk about emergency funds a lot on the show, putting money in a high-yield savings account as your primary first financial goal to protect yourself should things happen. Having a credit card that gives you additional travel insurance or car insurance or when your cell phone gets stolen, cell phone insurance or even enough points to get you out of a situation, giving you the ability to fly home should a family member get sick or should something happen where you need to leave the place you’re in and go home.
Credit cards are almost a secondary emergency fund, and this is what Dave Ramsey won’t tell you. He won’t tell you that credit cards are an incredibly powerful tool to build your credit, but also to even further protect yourself from financial emergencies. Some personal finance advice is not going to be for you. We talk about on the show a lot, personal finance is personal. For example, if you’re someone who uses credit cards but has a hard time not overspending or not abusing them, yeah, you might not want to use credit cards for a bit or you might want to find the root of that financial trauma to understand what’s actually going on. Why are you overspending? Why do you feel like you have to fill a void with how much money you spend? And that’s why when I wrote my book for example, we start the whole first chapter, which is the longest chapter by the way, about the emotions of money, about the psychology of money because I can’t teach you how to use a credit card responsibly.
I can’t teach you how to budget or pay off debt or invest or do the rest of the things that I teach you how to do if you don’t understand your financial triggers and you don’t understand why you might have the tendency to self-sabotage. So in general, the best thing you can do is understand these tools and how to use them so that when you are ready, you have the knowledge that you need, which is why we’re sharing this incredible episode, answering our most commonly asked questions about credit cards. When should you get one? What one is right for you? How to use them responsibly and the ones I recommend. And if you do want the link immediately as you’re listening to the episode to the ones that I use and recommend, whether you’re a student, whether you’re a frequent traveler, you want to travel more for free, whether you’re a business owner, you can go to herfirst100k.com/tools or the link that we’ve posted down below in the description. So let’s get into the episode, but first a word from our sponsors.
Hello Financial Feminists. My name is Tori Dunlap, but you probably already know that. Okay, we are talking about one of the most common questions we get, which is what credit card is right for me? Do I need a credit card? What are the credit card options and benefits? And we’re going to give you basically the complete guide to credit cards today. I have mentioned on a whole previous episode how I am not a debit card girlie. I am exclusively a credit card girlie, meaning that I put everything I can on a credit card to earn my maximum points, my maximum cash back, and also to limit my potential for fraud. Yeah, I just love fucking with some credit cards, so I’m going to tell you everything I wish I knew. Everything that I know now and all of the ways I’m able to use credit cards to literally get free shit, to travel for free, to get lounge access, to get just a shit ton of benefits and how you can do it too, and know it’s not just for the straight white guys who travel all the time for work.
So first off, why do I need a credit card? Okay, you need a credit card to build credit. I know that sounds like a no duh. Credit card used responsibly is one of the easiest ways to start building your credit so that you can have a great credit score. We have talked again on multiple previous episodes. We’ll link them down below about how to increase your credit score about what a credit score is, but easiest way to increase your credit score in order to give you all of the good things in life is to use a credit card responsibly. Responsibly being you are paying your bills on time and in full. Literally, so we just had a quick aside. Our podcast producer, Kristin just told me that she had just moved, which is amazing, and they wanted to check her credit in order to get her utilities, and if they didn’t check her credit or if she didn’t have credit, they were going to charge her $250.
You need credit to exist in this world. Now, credit’s like a kind of bullshit thing. We’ve talked about this before, but the current system that exists, you need good credit. The way to get good credit is to use credit responsibly. Easiest way to do that, use a credit card. Okay, how do I choose the best credit card? Now, the best is subjective to you. Personal finance is personal, I’ve said it a million times, but if for example, you sign up for a Southwest Airlines credit card, but you never fly Southwest Airlines, that’s not a good credit card for you. If you sign up for a card at a store but you never go to that store or you did it as an impulse in order to get the 15% off whatever, probably not your best option for a credit card. So I need you to look at your financial situation and research cards based on that.
If you are a student, there’s only so many cards you can qualify for right now because you don’t have a lot of established credit. If you are a frequent traveler, it might be beneficial to get a frequent travel card. If you are just looking for a good everyday card that checks all the boxes, that is secure and that isn’t anything fancy, I would recommend a cash back card. Cash back cards are simply you’re putting purchases on a credit card, you’re still paying them off in full, but you get points or cash back really every time you make a purchase. Some of these cards are like one and a half percent cashback, which doesn’t sound like a lot, but if you go and make a hundred dollar purchase, well, okay, you just earned a little bit of money. That can either go towards a gift card or towards actually paying your statement balance.
I’ll say this multiple times in this episode, but we have all of our recommendations for things like a student card, a cashback card, our travel cards all linked in our bio. You can also go to herfirst100k.com/tools to see all the ones we recommend. Okay, how many credit cards should I have? A lot of people think, oh my God, I can’t have a bunch of credit cards, or I have this one credit card and I’m scared to open another. Here’s the thing. I have, hold on, I’m going to count in my head. 1, 2, 3, 4. I have like eight credit cards, but I only used two or three on a daily basis. Now, did I open eight credit cards when I was 18? No, I did not. Would that have been a bad decision? Yes, it would’ve been. We are slowly opening up credit cards as our needs start to change.
Again, when I was 18 and trying to open my first credit card, I could not qualify for one of the big fancy credit cards that’s like metal and you hear it go thwack when you put it on a table, which is my credit card now and is such a flex and it’s so fun. But when I was 18, I couldn’t qualify for the Amex Platinum or the Chase Sapphire Reserve. I could qualify for a Discover card that looks like a cassette tape. I still have it.
I still use it because I want my credit to stay high. I want my credit score to stay high. One of the factors of credit is how long your credit’s been around for, your credit history. So with that credit card that I opened when I was 18, that is not my everyday card anymore, but I opened it and keep it open with a purchase every once in a while, and as I started growing in my financial life, as I started making more money and I started traveling more and my needs started to change, I would upgrade my credit card about once a year or maybe once every other year.
I went for my Discover card. Then I went to a cash back card because I could qualify for that. Then I went to an Alaska Airlines card because I was flying them all the time. Then I got further and further to the point where I could qualify for the bigger cards. Now again, we are using our credit cards responsibly, so I’m not putting anything on any of these cards that I can’t afford. I’m not putting anything on any of these cards that I can’t afford to pay off. So the answer to how many credit cards you should have is really as many as you want and can manage, but you don’t need 10. You don’t need 20. You don’t need a bunch of cards to crazy travel hack. For some people, that’s their hobby. They literally have a portfolio of credit cards. That’s not me. I need you to not open them all at once because what happens when you apply for a credit card is they do what’s called a hard credit check.
Anytime you do a big life event, maybe that is purchasing a house, purchasing a car, yes, opening a credit card, they are checking your credit. A credit check is not a bad thing, but if you’re getting your credit checked all the time, doing the hard credit check, not just looking at your credit score on Credit Karma, but if you’re getting a hard credit check multiple times a year all the time, that can look like you’re irresponsible. So don’t just go on a crazy like opening up a credit card frenzy. Be intentional about when and how you open the cards. Remember that new credit cards might lower your score temporarily, so it’s best to not open them before a big purchase like a mortgage, getting a mortgage for a house. But I will also say that opening up a new credit card is great for a bigger small purchase, if that makes sense.
Like a $2,000 purchase because many credit cards will have a introductory bonus. They will say, hey, if you spend let’s say $3,000 during these first three months, you get more points, you get a bigger cash back balance. One of the things you can do to earn that is to strategically wait to open up your credit card before you know you’re about to buy something. If I’m about to go to Europe, I’m about to spend $1,500 on a flight, great time to potentially open a credit card, and if you’re that person who did just open a credit card or is thinking about opening one and you’re like, how do I get that bonus? Think strategically. Set aside your big purchases for that time. Pay for dinner and ask people to Venmo you. You maybe even buy gift cards that you can use later with your credit card. Again, as long as you can afford it so that you can hit that bonus.
All right. We have a lovely question from a guest about breaking up and dealing with shared credit cards. First of all, congratulations. Also, sorry for breaking up. I never know what to say. I’m either like, yay, good for you, congratulations, or also, this is sad. Second, it depends on a couple of things and literally this is, I’m actually going to let you listen to this. I am going to Google it because I’m curious actually how this affects credit. You can hear my little clickety clack. I’m literally Googling shared credit cards removing user, because what you might want to do is if you want to keep one of you on the card, remove one of you, but I don’t know if you have a balance, if you can do that. I don’t think you can. Oh, see, there you go. See, I didn’t know this. Removing a name from the account, unlike a credit card with an authorized user, which is just like one person, me, you generally cannot simply remove one name from a joint credit card.
Most issuers will require you to close the account, and then it says some places will allow you to remove one person, but oh, however, usually the amount cannot be changed or usually the account cannot be changed until the balance is paid off. Okay, so if you pay your bills on time and in full, this is going to be very easy. You probably just close the card. You just close the card, you call it good. If you do have a balance though, this is where it gets a little spicy is you have to decide who’s paying what. Is one person paying all of it? If it was joint expenses, maybe you’re splitting that in half or you’re splitting that equitably, but that’s where things start to get a little spicy. So if you don’t have a balance, I would say just close the account, call it good, unless, here’s the thing.
See, this is why I had to Google it, because if this is your longest line of credit, that could potentially hurt your credit score, but I would say that this is one of those exceptions where I just want you to get out. I just want you to be done with it. It’s worth the temporary credit hit if it means that, okay, you’re done with this person financially and you don’t have to deal with that anymore. Closing a joint credit card is not going to remove it from your credit report. If you close the account in good standing, meaning that you don’t have a balance on it, your credit score is not going to take that much of a hit. My answer, do it clean if you can. If you do have a balance, that needs to be a conversation about who is responsible for what, how are we going to pay off this credit card, and if you were the person that got saddled with all of this credit card debt, that’s a different story and I’m really fucking sorry because that’s not fair to you.
A couple other questions about credit cards. We talked about this before, but I really want to highlight it. What does it mean to use a credit card responsibly? Paying it off in full and on time. So if you have a thousand dollars that you were putting on a credit card and your thousand dollars payment is due on the 10th of the month, this means that by the 10th of the month, you have sent in a thousand dollars to them. You can typically set this up on autopilot from your bank account. You can literally say, okay, hello, Capital One or Chase or whomever, I would like you to make sure that I’m paying my credit card off fully, so take the full balance of the bill out of my account every month. This is what I do. If you wait, if you’re either late or you pay part of it, you are now in debt or you’re getting charged a late fee really and or potentially, so credit cards are not bad.
They’re actually great tools. We talk about this in my book, Financial Feminist, they’re kind of like knives. Knives can hurt you. They’re also a great tool to cut things like vegetables. You need to use them responsibly and smartly. Credit cards are not the devil. Dave Ramsey wants you to believe that. They’re not. They’re really actually helpful as long as you use them responsibly. We’ve talked about this in previous episodes as well, so I’m going to give you the quick hit and if this still doesn’t make sense to you, go back and listen. You also want to keep your credit utilization under 30% if possible, meaning you’re utilizing less than 30% of your total credit in order to boost your credit score.
All right, my favorites. What are some perks that credit cards offer? My favorite part, let’s talk about perks. Two most common perks are rewards points and cash back. Rewards points and cash back can be redeemed for discounts on flights, hotels or car rentals, hotel room upgrades, cash back or statement credit, gift cards, tickets to events, physical products, and a lot more. I have used points that I have gotten to fly, literally points that I racked up with airline miles got me to New Zealand with Christine, like no money. It was like I paid for the fees for the flight that normally from Seattle to New Zealand. We did Seattle to Fiji, Fiji to Sydney, Sydney to New Zealand is usually a $2,500 flight. Got it for free. We love it. We love to see it. I have literally gotten thousands of dollars over the past, let’s say six years in cash back and rewards, so you can redeem your rewards points and cash back for all those options.
My other favorite part is all of the other things credit cards can get you. I have a laundry list. Here we go. First, some credit cards, and again, we have the ones that offer this linked at herfirst100k.com/tools or linked in our bio. Some credit cards offer airline lounge access. There is no better feeling than waltzing into a lounge in any airport in the world, getting a full gourmet meal plus alcohol for free and the ability to curl up in a comfy chair. I have saved so much money avoiding the overpriced airport food, and during these long layovers, I’ve been able to reserve literally a napping room or a bathroom with a shower. Christine and I flew in 2019 to London. We flew all night. I woke up at 7:00 AM London time, completely gross. I had been on a plane. We checked into the lounge.
We got a full English breakfast. We got coffee, and we got an hour reserved in a bathroom with a shower. That paid for itself. That felt so good. I got to change out of my gross underwear. I got to wash my hair. It was like, ugh, it was so good. You don’t have to be someone like me who’s traveling every other week either. Maybe you just go on vacation once or twice a year, but you’re like, I don’t want to buy the $40 airport chicken sandwich that tastes like shoes. It’s so good, guys. Airport lounge access worth the weight in gold. Another flight perk, TSA pre-check. Pre-check is expedited screening throughout your checkpoints. You don’t have to take off your belt. You don’t have to take off your shoes. I get through the airport in two seconds. Clear is also a potential benefit I get with my cards TSA pre-check for free, which is $75 and clear for free, which is $189.
I have not waited in an airport line longer than 10 minutes. I literally cannot tell you the last time. Global entry is also a potential perk for free. It is basically you get access into countries or really back into your home country for way less time. You avoid the lines. This is where this came in handy. I’m realizing the majority of this episode is just going to be telling you stories about how amazing these things are, and I’m not mad about it. I was coming back from Vancouver, Canada back into the United States. I went for my birthday last year. We roll up, this line to get our car back into the States was three hours long at least. You know what wasn’t three hours long, a full separate line for global entry.
We literally just drove up. We were through that line in 30 seconds. Incredible. Paid for itself. Okay? Seat upgrades, potential perk. Priority boarding, potential perk. Food and beverage credits, flight delay protection. This one is so crucial. I didn’t realize how hyped I was going to get this episode, but truly, if you get delayed, if your flight gets canceled, if you have to stay overnight in a hotel, your credit card will pay for it. Your credit card will pay for it so you don’t have to worry about it. Also, sometimes they’ll pay for trip insurance, that little thing at the end when you booking a flight and it’s like, do you want to pay for travel insurance? And you’re like, no, I’m not paying extra money. Sometimes your credit card will have that for you. Sometimes they’ll do baggage delay insurance. There’s also lost luggage reimbursement.
If your luggage never shows up, they will reimburse you for it. Okay. Hotel perks. This is also available with some credit cards. My credit cards that I love also give me early check-in or late check-out. I have some cards that’ll let me check out at 4:00 PM. If I got a late flight. Nothing better than sleeping in bed till 4:00 PM. Sometimes they’ll do food and beverage credits or they’ll do check-in gifts. I checked into a hotel two years ago to go to Disneyland. We got unlimited bottled water and some snacks. Doesn’t sound like a lot, but it was nice. It was lovely. Didn’t have to worry about it. Sometimes there’s spa and retail credit. There’s room upgrades. Christine and I, last year were in New Orleans for my birthday, or this was two years ago, credit cards got us a free upgrade to an executive suite.
This hotel room had two bathrooms in the room. There were two bathrooms. Never experienced that before, and an amazing view of the city. Free parking, upgraded Wi-Fi, concierge services. Okay. Couple of the other things that are really amazing. Car rental insurance. For most credit cards you get car rental insurance, meaning again that you are covered as long as you put the cost of that car rental on that credit card. They often will get you at Hertz or Budget. They’ll go, oh, do you want your own insurance? And if you don’t, you’re liable. You don’t have to pay them because it’s already included as a benefit. Priority access to events. There’s credit for streaming services. I get Peacock for free. I need to watch The Office constantly. It’s great. No foreign transaction fees is huge, meaning that if you go abroad and you use your credit card and you’re not charged extra for using it abroad. And one of the things you don’t realize until you need it is some cards will also cover emergency medical or dental deposits or costs when you’re traveling.
If you have to go to urgent care, if something happens and you need medical assistance, they will comp that for you. Again, depends on the card. A lot of these more robust benefits are available for these higher ticket cards. A lot of credit cards have an annual fee. The annual fee is sometimes like 50 bucks. Sometimes for something like the Amex Platinum that I have, it is $700. Now, is that a lot? Yes, but does it pay for itself? A hundred percent, yes. When you consider, okay, TSA pre-check $75. I get a $250 travel credit every year. I get airport lounge access and I’m not paying for food. It very easily pays for itself. Okay. This is the like TLDR to credit cards. Obviously, I’m a huge proponent of signing up for a credit card, starting to build credit and getting free shit. There’s very few moments in life where you get to have free shit that makes you feel fancy, so start building credit if you don’t have a credit card.
If you’re ready to upgrade your credit card, we have our recommendations linked. Get on it. I truly cannot say enough good things, but please make sure you’re using them responsibly. You’re paying them off on time and in full. Don’t let the knife cut you. Use it to make a yummy veggie stir-fry. As always, Financial Feminist, we appreciate you being here. We appreciate your support. If you like this episode about credit cards, please feel free to share it, and if you want to see more episodes where we’re answering your frequently asked questions, send us a voicemail. We’ll talk to you soon. Thanks for being here.
Thank you for listening to Financial Feminist, a Her First $100K podcast. Financial Feminist is hosted by me, Tori Dunlap, produced by Kristen Fields and Tamisha Grant. Researched by Sarah Sciortino. Audio and video Engineering by Alyssa Midcalf. Marketing and Operations by Karina Patel and Amanda Leffew. Special thanks to our team at Her First 100K, Kailyn Sprinkle, Masha Bakhmetyeva, Taylor Chou, Sasha Bonar, Rae Wong, Elizabeth McCumber, Claire Kurronen, Daryl Ann Ingram and Meghan Walker. Promotional graphics by Mary Stratton. Photography by Sarah Wolfe. And theme music by Jonah Cohen Sound.
A huge thanks to the entire Her First $100K community for supporting the show. For more information about Financial Feminist, Her First $100K, our guests and episode show notes, visit financialfeministpodcast.com. If you’re confused about your personal finances and you’re wondering where to start, go to herfirsthundredk.com/quiz for a free personalized money plan.
Tori Dunlap
Tori Dunlap is an internationally-recognized money and career expert. After saving $100,000 at age 25, Tori quit her corporate job in marketing and founded Her First $100K to fight financial inequality by giving women actionable resources to better their money. She has helped over five million women negotiate salaries, pay off debt, build savings, and invest.
Tori’s work has been featured on Good Morning America, the New York Times, BBC, TIME, PEOPLE, CNN, New York Magazine, Forbes, CNBC, BuzzFeed, and more.
With a dedicated following of over 2.1 million on Instagram and 2.4 million on TikTok —and multiple instances of her story going viral—Tori’s unique take on financial advice has made her the go-to voice for ambitious millennial women. CNBC called Tori “the voice of financial confidence for women.”
An honors graduate of the University of Portland, Tori currently lives in Seattle, where she enjoys eating fried chicken, going to barre classes, and attempting to naturally work John Mulaney bits into conversation.
