Melissa Lambarena
Appearances
NerdWallet's Smart Money Podcast
What to Do When the U.S. Gets Downgraded and Your Travel Credit Card Stops Paying Off
For instance, they say they have the United Quest card, so they could ask the issuer if they can switch to the United Explorer card, which has a lower annual fee, and it also offers two annual United Club passes. And I mention this because it sounds like lounge access is important to them.
NerdWallet's Smart Money Podcast
What to Do When the U.S. Gets Downgraded and Your Travel Credit Card Stops Paying Off
To answer the first part of your question, how people should approach taking out cards for perks, you want to make sure that you don't take out too many applications at once for a credit card because it can temporarily cause your credit score to drop. So you want to apply for one credit card only at a time. You want to consider whether your credit card is still adding enough value to your life.
NerdWallet's Smart Money Podcast
What to Do When the U.S. Gets Downgraded and Your Travel Credit Card Stops Paying Off
It's important to be periodically auditing your credit cards to determine if they're still right for you. Our lives are constantly evolving. And so after any major big changes, life events, you want to check in to see if your credit cards are still giving you as much value. And when you're looking for a new credit card, make sure that it's one that aligns with your lifestyle.
NerdWallet's Smart Money Podcast
What to Do When the U.S. Gets Downgraded and Your Travel Credit Card Stops Paying Off
So if the bulk of your budget goes heavily to groceries, then you want to look for one that will reward that generously.
NerdWallet's Smart Money Podcast
What to Do When the U.S. Gets Downgraded and Your Travel Credit Card Stops Paying Off
Typically, you want to avoid closing a credit card unless there's a good reason for it because it can have a negative impact on your credit score. Some possible reasons for closing one may be because they have higher annual fees or they no longer offer as much value as they once did, or perhaps if they're causing you to spend impulsively.
NerdWallet's Smart Money Podcast
What to Do When the U.S. Gets Downgraded and Your Travel Credit Card Stops Paying Off
When you close a credit card, your credit utilization can rise. That's the amount of available credit you have, and it's a key factor that impacts credit scores. A closed account could also impact the length of your credit history depending on different factors. So if you must close a credit card, your credit scores can eventually bounce back over time as you manage credit responsibly.
NerdWallet's Smart Money Podcast
What to Do When the U.S. Gets Downgraded and Your Travel Credit Card Stops Paying Off
But it's important to understand that these things can happen. Also, there is a lesser known alternative if you want to keep your credit score intact, and this is the product change. A lot of people aren't aware that they might be able to switch their credit card with the same issuer to one that offers more value or perhaps offers a lower annual fee. And what would the appeal of that be?
NerdWallet's Smart Money Podcast
What to Do When the U.S. Gets Downgraded and Your Travel Credit Card Stops Paying Off
The appeal is that you can typically keep your same card number and you don't have to apply for a new credit card and initiate that hard pull that typically causes your credit scores to temporarily drop. We'll include a link in today's episode description to an article we wrote that dives deeper into what a credit card product change entails and how it works.
NerdWallet's Smart Money Podcast
What to Do When the U.S. Gets Downgraded and Your Travel Credit Card Stops Paying Off
And whether you're upgrading, downgrading, or closing a credit card altogether, just be sure to make use of those rewards before you take any actions or at least understand what can happen to them if you do end up taking any of those actions.
NerdWallet's Smart Money Podcast
What to Do When the U.S. Gets Downgraded and Your Travel Credit Card Stops Paying Off
There you go. It is important to be reading your card's benefits because they are constantly changing as well.
NerdWallet's Smart Money Podcast
What to Do When the U.S. Gets Downgraded and Your Travel Credit Card Stops Paying Off
Unfortunately, this is something that people are navigating, but it's important to understand that there are implications for not having credit cards at all. Credit cards offer one of the easiest ways to build credit. And if you don't have credit cards or any form of credit to establish a credit history, it can make it more difficult to get a loan later on if you should need one.
NerdWallet's Smart Money Podcast
What to Do When the U.S. Gets Downgraded and Your Travel Credit Card Stops Paying Off
So unless you're a super saver who likely won't need credit later on to buy a car or a home, then it's worth keeping your credit options open. Also know that you might need to rely on good credit to be able to rent an apartment or get more affordable utilities or insurance in some instances. That said though, it's important to acknowledge that credit cards aren't always a good fit for everyone.
NerdWallet's Smart Money Podcast
What to Do When the U.S. Gets Downgraded and Your Travel Credit Card Stops Paying Off
If they're causing you to overspend or spend impulsively or they're not helping you along with your financial goals or they're hindering them in any way, then it's worth considering switching to a different payment method.
NerdWallet's Smart Money Podcast
What to Do When the U.S. Gets Downgraded and Your Travel Credit Card Stops Paying Off
It's an option, but you need to know what can happen if you go that route. Inactive credit cards may be subject to cancellation. If you don't keep a credit card open and active, it's not uncommon for issuers to close those cards due to inactivity. And that can have a similar impact to your credit score as if you were to close it yourself.
NerdWallet's Smart Money Podcast
What to Do When the U.S. Gets Downgraded and Your Travel Credit Card Stops Paying Off
So what you can do with those no annual fee cards that you don't have as much use for anymore is to keep them open with small recurring purchases that you can set up automatic payments for. Think like a gym membership or a streaming service subscription, for instance.
NerdWallet's Smart Money Podcast
What to Do When the U.S. Gets Downgraded and Your Travel Credit Card Stops Paying Off
Just make sure that you are keeping track of everything, especially if you have more than one credit card. You want to be organized and keep it manageable. And if for any reason you find that it's getting a little bit hard to handle, then it's time to reconsider your strategy and maybe consider a product change.
NerdWallet's Smart Money Podcast
What to Do When the U.S. Gets Downgraded and Your Travel Credit Card Stops Paying Off
That's right. That's a great tip because some of those annual fees are hefty, several hundreds of dollars. So you want to make sure that you're not caught by surprise when that annual fee hits.
NerdWallet's Smart Money Podcast
What to Do When the U.S. Gets Downgraded and Your Travel Credit Card Stops Paying Off
It's important to understand that if you are trying to chase those points or you could potentially end up with those multiple credit cards, it's not a good place to be unless you have an organized system to keep track of those annual fees.
NerdWallet's Smart Money Podcast
What to Do When the U.S. Gets Downgraded and Your Travel Credit Card Stops Paying Off
Because what you're going to want to do is make sure that you have a list of those perks and incentives to know that you are making the most out of them to offset that annual cost. A credit card's annual fee can only be worth it if you can make use of those perks.
NerdWallet's Smart Money Podcast
What to Do When the U.S. Gets Downgraded and Your Travel Credit Card Stops Paying Off
you can make a list of the ongoing perks and incentives that the card offers. You want to look at what that particular credit card offers. For instance, if it's a travel credit card, are there credits that it offers? Are there different benefits like free checked bags or perhaps an anniversary bonus or other types of incentives that can offset the cost of the annual fee?
NerdWallet's Smart Money Podcast
What to Do When the U.S. Gets Downgraded and Your Travel Credit Card Stops Paying Off
Now, just because they offer the perks to offset the annual fee doesn't necessarily mean that you'll make the most of them. So you want to be realistic with yourself and know whether you'll actually use those perks. Otherwise, you're going to be paying out of pocket to make up the cost of that annual fee.
NerdWallet's Smart Money Podcast
What to Do When the U.S. Gets Downgraded and Your Travel Credit Card Stops Paying Off
A spreadsheet is an excellent way to be able to keep track of everything. But if that's not your style, a simple list going the old school way and writing things down will be helpful. In the listener's case, it sounds like they are no longer getting as much value from the card to justify the annual fee. It's unclear if they factored in the value that the card offers for checked bags, though.
NerdWallet's Smart Money Podcast
What to Do When the U.S. Gets Downgraded and Your Travel Credit Card Stops Paying Off
If they do use that perk, the card can almost pay for itself, even if they don't end up using some of the other card benefits. From what they've shared, though, it sounds like they still have some options. They can potentially extract value from a general purpose travel credit card, or they can also consider switching their credit card to one that has a lower annual fee with the same issuer.
NerdWallet's Smart Money Podcast
The Price Isn’t Right: How to Stop Overspending and Stay Debt-Free
To help us answer this listener's question, on this episode of the podcast, we're joined by Melissa Lamberina. Melissa is a personal finance writer whose work has been featured by the Associated Press, The New York Times, Chicago Tribune, The Washington Post, USA Today, and Yahoo Finance, among others. Melissa, welcome. Thank you for having me. It's a pleasure to be here.
NerdWallet's Smart Money Podcast
The Price Isn’t Right: How to Stop Overspending and Stay Debt-Free
I agree. And financial therapy is this burgeoning subfield within the field of therapy. And there's a really good reason for that. You know, we learn certain money behaviors and patterns well before we manage our own money. I mean, children pick this stuff up well before they can even really express themselves. That's how young this stuff begins to show up.
NerdWallet's Smart Money Podcast
The Price Isn’t Right: How to Stop Overspending and Stay Debt-Free
It seems like these patterns not only are affecting the listener's goals in life and their ability to live a life that would make them happy, but it is also affecting their relationship with their spouse. That means that there may be some relationship conflict going on that really would benefit from being talked about with a neutral third party.
NerdWallet's Smart Money Podcast
The Price Isn’t Right: How to Stop Overspending and Stay Debt-Free
Yeah, you know, I'm somebody who's gone to non-financial therapy over the years on and off, and it is a cost, but I consider it an investment in yourself. Sometimes in life, you need to assemble what I call the paid village of care. We always say it takes a village. Sometimes you talk about that in terms of having kids, but adults need their village, too.
NerdWallet's Smart Money Podcast
The Price Isn’t Right: How to Stop Overspending and Stay Debt-Free
Exactly. And maybe your friends and family are not able or equipped to help you work through this particular issue that you have with debt. That's where you can pay somebody who does have the tools available to help you explore what's going on with you and help you find ways to get out of this cycle.
NerdWallet's Smart Money Podcast
The Price Isn’t Right: How to Stop Overspending and Stay Debt-Free
So we've talked about exploring the backdrop and what's going on for this listener and maybe how they got to this point, but we should probably also talk about some tactical ways they can prevent themselves from going into credit card debt again, especially if there's maybe some time before they can talk to a therapist.
NerdWallet's Smart Money Podcast
The Price Isn’t Right: How to Stop Overspending and Stay Debt-Free
What's something they can do even starting today to potentially better their situation? Melissa, what are your thoughts here? I think the best place to start is to review your budget.
NerdWallet's Smart Money Podcast
The Price Isn’t Right: How to Stop Overspending and Stay Debt-Free
Yeah, you mentioned trying to avoid saving your credit card information with online merchants. Technology has made spending money nearly frictionless experience. And when you write about payment technology, you hear a lot of the innovations that are going into helping consumers buy with one tap or one click or use virtual credit card numbers.
NerdWallet's Smart Money Podcast
The Price Isn’t Right: How to Stop Overspending and Stay Debt-Free
All these things that add a lot of convenience to online purchases, but they also make it way too easy to just spend, spend, spend. on impulse, put some friction back into the buying experience. And that can give you some time and space from the initial impulse to buy something to actually making the purchase. And that space can help you reconsider.
NerdWallet's Smart Money Podcast
The Price Isn’t Right: How to Stop Overspending and Stay Debt-Free
And if you have to go so far as to literally freeze your credit card in a block of ice, do it.
NerdWallet's Smart Money Podcast
The Price Isn’t Right: How to Stop Overspending and Stay Debt-Free
Put it in the back of your freezer, behind some leftovers you know you're not going to eat.
NerdWallet's Smart Money Podcast
The Price Isn’t Right: How to Stop Overspending and Stay Debt-Free
Yeah, and I'm a big fan also, not just saving for the things that you want to do or need to do, but also learning to say no to stuff that doesn't actually matter to you and would cost you money. So let's say you're invited to a wedding of somebody that's kind of an acquaintance from college, but you haven't really spoken to them in a decade and it would involve travel. Maybe just say no to that.
NerdWallet's Smart Money Podcast
The Price Isn’t Right: How to Stop Overspending and Stay Debt-Free
You don't really talk to them. Your relationship's not where it used to be. Why spend $1,500 on going to a wedding when you're probably not even going to speak to the bride and groom for more than five seconds, right? This way you can allocate more money to the things that do matter to the wedding for the friend you talk to five times a week.
NerdWallet's Smart Money Podcast
The Price Isn’t Right: How to Stop Overspending and Stay Debt-Free
Look through your recent credit card statements and really determine what are some purchases that didn't really bring you joy that weren't necessary. Obviously, putting gas in your car might not bring you joy, but it's something you have to do if you have to use your car. But what did you buy that you realized was a mistake? Are you paying for any subscriptions that you don't use?
NerdWallet's Smart Money Podcast
The Price Isn’t Right: How to Stop Overspending and Stay Debt-Free
What are those money vampires that are taking money away from the things that you really want?
NerdWallet's Smart Money Podcast
The Price Isn’t Right: How to Stop Overspending and Stay Debt-Free
One other thing worth mentioning is if you've already overspent on your credit cards and you're in debt, there are ways to lower your interest payments so you don't have to pay such a high price for your overspending. For example, there are zero balance transfer fee credit cards with introductory APRs that could significantly lower your monthly interest payments.
NerdWallet's Smart Money Podcast
The Price Isn’t Right: How to Stop Overspending and Stay Debt-Free
NerdWallet has a write-up of the best no-balance transfer fee credit cards to help you compare your options, and we'll link to that in today's show notes. I will say, however, you don't want to fall into the trap of transferring a balance from card to card to card to keep kicking that debt can down the road.
NerdWallet's Smart Money Podcast
The Price Isn’t Right: How to Stop Overspending and Stay Debt-Free
Use this as a tool to get out of debt interest-free, and then once you're out of debt, start working on staying out of debt.
NerdWallet's Smart Money Podcast
The Price Isn’t Right: How to Stop Overspending and Stay Debt-Free
And here's our brief disclaimer. We're not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances.