What You Should Know About Managing Your Credit Cards

[MUSIC PLAYING] EMILY BIGHAM: Hi, and welcome to the podcast MakingCents, brought to you by Navy Federal Credit Union. I'm your host Emily Bigham. And each week, I'll be taking your questions to the experts to help you make sense of your money. Pun intended. 

 

Welcome back to MakingCents. Today, we're talking about credit cards. Our guest is Elly Szymanski. She's the assistant vice president of credit cards here at Navy Federal. Hi, Elly. How are you? 

 

ELLY SZYMANSKI: Hello. Thank you so much for having me. 

 

EMILY BIGHAM: Thanks for coming on. So when did you get your first credit card? 

 

ELLY SZYMANSKI: Oh. Funny and somewhat painful story about that. My first credit card was back when I was in college, and it was one of those store cards. And because I was in college, I was changing addresses frequently. 

 

And so by the time I actually ended up getting the statement and needing to make the payments, there was a delay in getting to me because I had changed addresses. So by the time it finally caught up with me, and with the late fees and the interest charges, that $50 skirt was quite a bit more. So that was definitely a lesson. 

 

That said, today, it is so much easier to keep track of things like that. I have apps. I have email alerts-- really, so many tools to make sure that that kind of scenario doesn't happen today For anybody opening a credit card. I can really stay on top of what that looks like. 

 

EMILY BIGHAM: Yeah. Those interest payments can really add up over time. Speaking of interest rates, the news these days is all about rising rates, inflation. And inflation to us really is like the cost of eggs and milk at the grocery store, right? Or the cost of diapers. What's one word that you would use to describe the headlines about inflation? 

 

ELLY SZYMANSKI: In one word, I think it'd be fair to say it's concerning, of course. As you're trying to spend your monthly budget, and you're seeing your cost of groceries going up-- the typical expenses you need on your life, whether that be rent or other services-- it can be concerning. Right? 

 

So I do definitely appreciate the needs to try to figure out how to balance that across your budget and the struggle that is in making sure that you're still responsible with your payments and your financial health, even in these economic times. 

 

EMILY BIGHAM: What are some good ways and some bad ways to use your credit card during high-inflation times? 

 

ELLY SZYMANSKI: Certainly. In any time, if you can avoid carrying a balance, you certainly want to, especially in a quote, unquote, rising-rate environment that we have now. Right? With those interest rates higher, that balance that you're carrying over, it's going to cost you more. 

 

So the first is try to avoid carrying a balance. If you do find yourself in the situation where because those goods are going up or you have unexpected expenses, really try to make sure that you are digging into what those interest rates are for your various cards and products because you really want to make sure that you are carrying a balance at the lowest possible rate. 

 

EMILY BIGHAM: So what if you can't help but carry a balance? 

 

ELLY SZYMANSKI: Yeah. That is where inquiring around what your interest rate is is really important. And then, another financial tool that many people use is a balance transfer. And so it's kind of-- it does feel a little like paying one debt with another, but you're able to refinance that for a much lower rate. 

 

And so when you're looking at those balance transfers-- whether that be opening a new card or even just doing a balance transfer across your existing products-- you're really looking for low fees and low rates. And watch out for those fees. I mean, those can be a 3% or 5% upfront cost. 

 

And when you're looking for those low rates, they can tempt you with a 0%, but it comes with a big fee. And so even something at .99%, 1.99%, might be a great way to get that balance transferred over, keep those payments low, and help keep you on financial track. 

 

Much like my original story, use your tools at your disposal. Right? Make sure that you are aware of when that promotional balance transfer rate is going to change. And have a plan in place to pay it off by then, or at least to know that that's your milestone that you're aiming for. 

 

EMILY BIGHAM: So balance transfers. If you have multiple credit cards at different financial institutions, can you balance transfer across financial institutions? Does it have to be within the same one? Or what are the rules? 

 

ELLY SZYMANSKI: It really varies from financial institution to financial institution. And so what you want to make sure that you're doing is, again, checking for those lowest rates. And then, go ahead and just ask the individual places where you bank and you finance what their rules are around that. Right? 

 

So some of them allow within the same organization. Some only allow you to transfer balances out. So just look at-- go ahead and inquire or look online at what those terms are to make sure that you're able to maximize the benefits there. 

 

EMILY BIGHAM: Great. So I want to kind of switch gears a little bit and talk about some of our member stories. So 24% of our members calling in to our contact center about credit cards are questions about transactions. So that's a fancy way of saying the purchases that you make. When are they going to post? Or what does it mean when it's pending on your statement? 

 

ELLY SZYMANSKI: Certainly. That is a great question and a really confusing item. Right? You see that amount on there is pending. And you're trying to figure out, was that me? Was that maybe an authorized user on your account? What does that mean at the end of the day for your balance? 

 

Well, one thing to keep in mind is there's a lot of parts of this process. Right? So there's the merchant that you're working with. There's the company that helps them swipe those cards. You might have seen Square. Or some others have these quote, unquote, point-of-sale terminals that allow those transactions to work. 

 

On the back end, there's our networks. Right? You have a Visa card, a MasterCard, an AmEx, et cetera. And then, there's also the processor. So even on your financial institution , we're working with someone to help make sure that those transactions are running smoothly. So with all of those steps in place, and everyone has their own timeline for being able to get through all those thresholds-- to make sure that it was you, to make sure it was a valid transaction, et cetera-- it can end up taking a couple of days. 

 

The great news about that is even if you see it pending, if it is a fraudulent charge-- particularly here, at Navy Federal, I know we always got our members backs. So we are really looking to make sure that once it does post, that it's you, and that it's valid, and that we're making sure that that was right. 

 

EMILY BIGHAM: So I always see that holding charge at gas stations. What is that about? 

 

ELLY SZYMANSKI: Oh, great question. So the gas station has no idea how much you're going to be spending on gas that day when you first put in that card. Right? And so what they're doing with that hold is making sure that it's a valid card, making sure that you have enough capacity on the card for kind of the maximum they think you might charge. 

 

And that is not going to be the final amount that posts. It's just their way of managing that risk for themselves. They know that you're covered. And then, by the time it hits your financial statement, they are going to correct it to match what you actually spent at the pump. 

 

EMILY BIGHAM: OK. So that's what that is. So another question that we get a lot is around payments. So whether a member is asking to make a payment or deciding how much they should pay, what's your top tip about making payments? 

 

ELLY SZYMANSKI: If you can manage it, set up auto pay. There's nothing, to me, more scary or painful than having missed a payment, especially if it was something I could avoid. So I'm a big fan of setting that up, even if you set a reminder to yourself that that payment is coming out, so you can check your balances, et cetera. But setting that up in advance is a great way to stay on top of it. 

 

If you're not sure you can pay your full amount every month, even setting up that auto-pay for your minimum payment helps make sure that you're never going to miss a payment. You're not going to get hit with any late fees. And it helps secure your financial standing. Right? 

 

We talk about our credit scores, et cetera. Right? So making that minimum payment really keeps you on track for those things. If you're able to pay more than that, you can always go into your app. You can always talk to your financial institution and put in more. 

 

EMILY BIGHAM: At what point does a missed payment impact your credit score? Is there a timeline? 

 

ELLY SZYMANSKI: The exact timeline is something between your credit union or your bank and the credit bureaus, and when they have to make those reporting standards. But it's not the first day that you're late that it's going to show up there. But you certainly don't want to fall into that category too frequently or as a common occurrence. 

 

EMILY BIGHAM: So if you miss the payment-- you miss the minimum payment-- you still might have a few days to call, make a payment. Right? I mean, I know that the top tip is to set up minimum payments. But if there's people who are concerned about the amount of money in their checking account, it's always best to probably call and just see what the financial institution can do about it? 

 

ELLY SZYMANSKI: Absolutely. A lot of great places-- like Navy Federal-- we have financial management as well. So you can call up and get some assistance around even if you can't make the minimum payment, what can you make? 

 

And helping to keep you in good standing, even if you're working out what that right path for it is for you, it's always better to call and contact than to wait until it's too late. Right? We really want to find those upfront solutions to be that good partner, in setting up a plan that's going to work for you. 

 

EMILY BIGHAM: Speaking of new cards, what would you say is the sweet spot for how many credit cards you should have in your wallet? 

 

ELLY SZYMANSKI: Somewhere around two or maybe a little bit more, depending on your spend. But I think two is a solid place to start. And let me explain what I think those cards could really be. One of the cards in your wallet could be kind of a utility card. Right? Something with a great cash-back offering. We have 1.5% on every purchase, so you know that you're always getting at least 1.5% in those rewards back. 

 

Another card to complement that with might be something where you have a really high spend category. So if most of your monthly expenses are at the grocery store, find a card that has grocery store rewards at at least 3x. And so that's where you want to spend that card to maximize those rewards. 

 

And so between those kinds of products, you can really make sure that you're maximizing your reward value. And also, then, if you are carrying a balance, having those variable interest rates can help you manage your spend to your lowest interest rate. 

 

EMILY BIGHAM: I also like to have a card dedicated for emergencies-- so one that I don't really use. I'm not very active on it. It has a low interest rate. But just in case something comes up, you know that you have the available credit when you need it. 

 

ELLY SZYMANSKI: That's a great point. My emergency card is actually not that first store card but one I got shortly after that. It's the longest card in my wallet. So it doesn't have the best value proposition because I've obviously come further along in my financial journey. But it has the longest credit history. 

 

And so for that reason, one, it allows me to have some kind of emergency backup available. And two, it maintains that long credit history with the credit bureau. So even if you are looking to consolidate cards or remove any cards in your wallet, you really want to be mindful of keeping those longer credit history options to help maintain that credit history time line. 

 

EMILY BIGHAM: And that actually was going to be my follow-up question. There are so many great credit cards that come out. Should you be closing cards before you open new ones? Or would you say that it's OK to have more than three, as long as you're keeping track of your spend? And just for the credit purposes as well-- like, what if you have five cards, and you want to get another one? Should you be closing one? Or is it OK? 

 

ELLY SZYMANSKI: Closing cards and closing lines of credit can have a short-term impact on your credit bureau score, and so you may want to avoid doing that until you've kind of opened up the desired product. That said, having that available capacity may be important to you and your financial situation. And so what I would say is from a security standpoint, make sure, even if you're not using them every day, you know where those plastics are. And you keep access to those statements and that online portal, or even access to call the bank and check the balance, because you do want to make sure that even if it's something that has moved to the back of your wallet, it's not something that a fraudster has gotten a hold of. 

 

EMILY BIGHAM: Can a bank ever close your credit card without you trying to? 

 

ELLY SZYMANSKI: If you have not used a credit card for a long time, they can, and they will, on some occasions at some financial institutions. And so that is something where, yeah, if you do have one of those older cards that you're saving for emergencies, throwing a small transaction on there once a year that you then immediately pay off can be a good way to just make sure that that credit history stays fresh with that financial institution. 

 

But not all places do that. And they do it to varying degrees. So I think the major watch-out there is every so often, go ahead and throw a transaction on there, if you are concerned about an account closing over time. 

 

EMILY BIGHAM: For those who are new to the credit card space, like our gen-Z population, what advice do you have for them? 

 

ELLY SZYMANSKI: Great question. So as much as I told a cautionary tale around my first credit card, I actually think it's really important to start building that credit history as soon as you feel able. But you don't need to have it perfect to be ready. And there's a ton of great, secured products out there. And what that means is you put down a savings deposit to hold against that credit card balance that you can then use. 

 

So it's a great way to have a low-risk entry into the world of credit cards. Navy Federal has our nRewards Secured card that also earns rewards at the same time as building your credit. And so a great place to start is going to be a secured card that you can manage the risk, and start charging those expenses as appropriate, and paying down that balance each month. 

 

EMILY BIGHAM: So when they're ready to graduate from a secured card to a regular credit card, can you talk about some of the rewards options out there? 

 

ELLY SZYMANSKI: There are some great rewards options out there. Here, at Navy Federal, we have cash cards, and we have points cards. Cash cards are exactly that. Right? The value proposition on that is every time you make a transaction, a percent that turns into cash that you can use right back on your statement to help you pay off your balance or to save up for something big so that you're seeing those kind of rewards on a regular basis. 

 

Some people can be intimidated by the other kind of card-- by a point card-- but there's no need to be. In many cases, those can be transferred right into cash as well. It works the exact same way. But some of the fun things about the reward points is those can be redeemed for gift cards at a good rate. Those can be redeemed for travel or vacations. 

 

And those can be another great way to save for the future by just using your normal spend, building up that bank, and then being able to go on to the resources there and find some great holiday gifts, get those gift cards for some of those mystery people in your family who you're not quite sure what to get for them. 

 

Or even right now, as we're thinking about making those vacation plans for the summer, go ahead and book those airlines or those hotels with those points. And give yourself a pat on the back that you earned that. But when it comes to cards with annual fees, you definitely want to make sure that you're getting your bang for your buck there. Right? 

 

And so maximize those rewards. Don't be afraid to dive into the inserts. go digging deep into the online portal because if you're going to be spending that money, you want to be saving that money. And so you want to be making sure that you're really taking advantage of all the value that that can bring. Some of them come with higher multipliers. Each spend gets you more rewards. Some of them don't. 

 

So watch that, as well as some of those benefits that might help offset the cost-- can be things like merchant discounts, or even your TSA pre-check can be covered. And that can be money back on your statement that helps offset that fee. 

 

You do want to make sure that you are getting that full value of the fee. You want to make sure that whatever card you're partnering with, that you're getting that full value back. Otherwise, that annual fee is not working for you. 

 

EMILY BIGHAM: What's the benefit of having a credit card at a credit union? 

 

ELLY SZYMANSKI: I love having a credit card at a credit union for a couple of reasons. One is I just know that I'm not only an employee here and someone who's really passionate about our credit card products, but I also carry them in my wallet. Right? 

 

And it's great to know that the partnership that I have with my financial institution is for our shared best interest. Constantly here, as an employee, we're asking ourselves, are we making this great for the member? And then, as a member, when I'm spending and getting those rewards back at the grocery store or the gas station, I'm getting to feel the benefits of that. Right? 

 

Another great benefit about a credit union-- and really any credit union-- is "regulatorily." So we are capped at 18% interest rate. Now, of course, we always keep our interest rates competitive because we know that interest matters for everybody's monthly budget, when you're thinking about how you're spending and what you're carrying as a balance. 

 

And so even with this rising inflation that we talked about earlier, even with rising interest rates, credit unions are capped at 18%. And so oftentimes, when you look across the products in your wallet, we are going to be the lowest rate that you have for that very reason alone. 

 

EMILY BIGHAM: Thank you, Elly, for coming on the podcast. It's always great to talk to you. Now, we're going to leave the audience with this one question. So if we talk about credit cards a year from now, in 2024, what do you think we'll be talking about? 

 

ELLY SZYMANSKI: There's so many things happening. And I certainly don't have a crystal ball. I think in the big picture, I'm hoping that we're going to see this inflation come back down. And we're going to see the unemployment stay low and our economy continue to grow. 

 

And with that, I really find that credit cards are a really useful budget tool and a really useful financial tool for enabling everyday spend in everyday life. And so along those lines, I'm excited, regardless of the financial outcome, to be here looking out for our members and continuing this partnership. 

 

EMILY BIGHAM: Thank you so much. 

 

ANNOUNCER: Navy Federal Credit Union is federally insured by the National Credit Union Administration. This podcast is intended to provide general information and shouldn't be considered legal, tax, or financial advice. It's always a good idea to consult a tax or financial professional for specific information on how certain laws may apply to your individual financial situation. 

 

References to and participation with the military community does not constitute organizational endorsement. Navy Federal is an equal housing lender. Navy Federal Credit Union. Our members are the mission.