No matter where you are in your credit journey there’s always ways to improve; be it an increase in score, greater return on your money from better perks, or in some other fashion. For the past year, I’ve focused on finding every way possible to maximize credit card value while minimizing my spending. From reading blogs by The Points Guy to watching videos by Graham Stephan, The Credit Shifu, and Ask Sebby I’ve immersed myself in more than my fair share of credit card knowledge. Through this I’ve established some basic principles for myself:
- Always pay my balance in full on-time.
- Never use a credit card to buy things I don’t already have the money for
- Never spend money on things I wouldn’t ordinarily buy to meet benefit thresholds
These basic principles have allowed my credit score to steadily rise and open up opportunities to access better credit cards that allow me to save more money, pay for travel, and more. These principles are the foundation of any strong credit journey. They’re easy to remember, easy to follow, and most of all they work. But, if you’re anything like me you know that having some basic principles is only part of success. To go past these basic principles, I’ve developed a credit card tech toolkit to help maximize credit cards while minimizing spending.
Tool #1: Mint
First and foremost Mint is the most important tool on your journey to not only maximizing the value of your credit cards but also having a strong personal finance aptitude. Mint is a tool that allows you to create budgets you can track in real-time with little manual effort. Mint has A LOT of features that are beneficial, but for the purposes of this post, we’ll focus on the ones related to credit score.
Mint allows you to link the following:
- Credit or Debit Cards
- Bank Accounts
Linking these is as easy as entering your login info for online accounts or your account numbers and routing information (depending on the bank). You’ll want to make sure you link ALL active credit cards, debit cards, and bank accounts. Otherwise, this will not be fully comprehensive as it’s intended to be. Once you’ve linked them all you can then use those Mint to:
- Create a Monthly Budget
- Set Financial Goals
When you create a budget, you’ll want to do it based on your income. For example, if you’re paid $1500 bi-weekly and make an extra $300 a month selling stuff on eBay. You can assume you’ll have around $3300 a month in income. Your total spend should not exceed this number so keep it in the back of your head as you create your budget. The first step towards creating your budget is to start with the costs you have to pay every month no matter what, with the exception of debts (i.e, rent, car insurance, groceries). Once you’ve factored in all those costs, you should then move into setting goals. Goals will appear slightly different than your regular budget items, but the general principle is the same. You’ll be setting two kinds of goals; ones that work towards paying down debt and ones that work towards building wealth. Some examples could include paying down your student debt, creating an emergency fund, or making monthly contributions to max out your Roth IRA. The benefit of making goals is you’ll be able to adjust the time frame to come up with new monthly payments that work for you. Consider the interest rate for each goal you set (whether it’s working for you or against you) and find a timeframe that works for you. You should balance your goals between ones that are building wealth and ones that are reducing debt. Sometimes the interest you can earn from investing outweighs the interest you pay in debt. In that instance, it would make sense to invest more and make smaller payments on your debt. For debt repayment strategies see my other blog post Two paths to paying off debt. After you’ve created goals both to create wealth and pay off the debt you’ll go back into your budget and add in any non-essential budget categories. For example, subscriptions, restaurants, clothes, etc. The degree to which you can minimize spending here the better. It’s important to do this last because you want to make saving and investing a priority over “play money.” It’s totally fine and normal to spend some money every month to just enjoy life, but don’t make that your priority.
In short, make the payments you can’t live without, use as much additional money as possible to pay off debt or invest, and then leave yourself a little bit of play money because we’re all human and need to enjoy some of the little things in life.
Once your budget is set up, the real benefit of Mint comes into play. Since your budget matches your income and all your credit cards and debit cards are linked you can track all money coming in and out in one place. Mint will create a transaction log for you and automatically categorize purchases according to the budget you made using their pre-populated tags. This will be totally editable by you in case the auto-categorize is ever wrong (it will be), or you make a purchase that needs to be divided between two categories. This is beneficial because it forces you to cut back on spending and not make assumptions based on memory. You know exactly how much you’ve spent in a given category every month and exactly how much you have left to spend. You won’t run up a credit card bill you can’t pay for or make irrational purchases based on emotion. It makes you a more conscious consumer as you’ve given every dollar a purpose.
Tool #2: Credit Karma
Tacky commercials aside, CreditKarma is an incredibly valuable tool for anyone looking to improve their credit score and control their debt. It provides your credit score at two of the major credit bureaus in real-time and gives you insights into how to improve your score through their credit report tool. This tool tells you where you stand in each of the major credit score pillars (from very bad to fair to very good). For example, if you have derogatory marks that are impacting your score, CreditKarma will pinpoint those marks in each pillar allowing you to adjust accordingly. It will show the reason your score dropped in a particular month is because you applied for a new credit card last month which counted as a hard inquiry about you. It takes the guessing out of credit score drops and allows you to course correct.
In addition to this CreditKarma will show a roundup of your total available credit broken down by each card. You can view the total credit line you have used versus available between all cards, and even drill down into individual cards. In real-time, you can see your utilization on each card and guidance on how the utilization will impact your score (General rule of thumb: Keep it under 10%). This will allow you to know when you may need to prepay cards to avoid a decrease in credit score from high utilization or request a limit increase.
Where Mint serves as your hub for total money in, total money out, and prevents you from overspending your budget, CreditKarma will serve as your hub for credit score maintenance individual card maintenance. It will allow you to know where you need to make changes to improve your overall credit score and help you determine which cards you may need to pre-pay to avoid damaging your score.
Tool #3: MaxRewards
The final tool you’ll want in your credit card tool mix is MaxRewards. It is a relatively new tool in the credit card community, but it’s grown immensely valuable for those of you that have multiple credit cards. Like with Mint, you’ll want to link all your credit cards to MaxRewards. It will then pull the perks associated with each card to determine which card is the best to use in any given situation. For example, you may have one card that offers 3% cashback on dining but only 1% cashback on gas. But then you also have a card that offers 4% cashback on gas and 1% cashback on everything else. Then you also have another card that offers 2% cashback everywhere. You get the point, with multiple cards it becomes confusing to remember how to maximize the benefit of each card. MaxRewards will tell you exactly which card has the best value at a given location — even for brand-specific cards. Like in the case of the Discover It card which has 5% cashback for revolving categories, but only at specific stores. MaxRewards will map all the stores near you at a given time and show you what card to use at that store to maximize your benefit. So you don’t end up going to Walmart and using your Discover card thinking you’ll get 5% cashback for groceries only to remember after purchasing that Walmart is excluded from Discover’s 5% cashback. In short, you no longer have to try and memorize each card’s best value or create tedious spreadsheets to determine when to use each card. Instead, you dock into MaxRewards and know exactly when and where to use each card.
Now I will note, being this app is relatively new it won’t allow you to link every card or see where each card has the best value at every store, but as it continues to grow it’s an app I’m confident that will improve. I see it having a huge value to any credit card user who wants to get the most out of their dollar. Saving an extra percent here and there may seem insignificant but it will add up fast over the course of a year, and MaxRewards takes the hassle out of memorizing what card to use where making saving money easier.
Where Mint serves as your hub for total money in, total money out, and prevents you from overspending your budget; CreditKarma serves as your hub for credit score maintenance individual card maintenance, and MaxRewards allows you to get the most value out of the money you’re spending.