TPG’s 10 commandments of credit cards

Dec 23, 2020

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Editor’s note: This guide has been updated with the latest information. 

The pandemic has reshaped how we think about spending on our credit cards. Not only may overall spending be reduced, but our strategies for earning points, miles or cash back (or a blend of each) look a little different this year.

Still, whether you’re a credit card rewards novice or full-on expert, there are key tenants to follow — regardless of the macro environment.

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As the saying goes, “everyone makes mistakes,” and the points and miles game is no exception. Whether you’re brand new to the hobby or a seasoned pro, the potential for errors is always there.

In this guide, I want to share my 10 “commandments” for travel credit cards to help you avoid some of the most common mistakes made by cardholders.

In This Post

Thou shalt pay thy balance in full

To me, keeping a balance is the cardinal sin when it comes to credit cards.

Unfortunately, I know several people who treat credit limits like free money, spending at will without any definitive plan to pay the balance down. Aside from being a surefire way to wreck your credit score (and hurt your ability to open cards or obtain a mortgage or other loan in the future), this behavior will also cost you money.

Most rewards credit cards carry high interest rates — although a few offer 0% APR for an introductory period — so running up a balance and not paying it off every month will negate the value of any points or miles you earn.

How to comply

(Photo by justplay1412/Shutterstock)

Whether you have one credit card or 19, always spend within your means and stay organized. Personally, I use an Excel spreadsheet to project out my bank account for at least three months so I know that my outflows (payments, checks, etc.) never exceed my inflows (income).

Related: How TPG staff’s credit card strategies have changed during the pandemic

Thou shalt not miss a payment

Though not nearly as bad as running a balance, missing payments can be very costly. For starters, most credit card issuers charge a late fee of $25-$35 if you submit a payment even a single day late.

Payments made beyond your due date can also greatly impact your credit score. Your payment history makes up over one-third of your overall credit score, and while one missed payment isn’t fatal, several are a cause for concern.

Related: What to do if your credit card is delinquent — and how to prevent it from happening

How to comply

Take advantage of the auto-pay features available on just about every credit card.

When I open a new card, I set a calendar notification for four to six weeks later so I remember to add my bank account and/or set up automatic payments. Just keep in mind that there may be a one-to-two month delay in activation, so you may have to manually make the first one or two payments before auto-pay kicks in.

Related: How to set up autopay for your credit cards 

Those unused credit cards in your wallet are still useful! (Photo by mixetto/Getty Images)
Those unused credit cards in your wallet are still useful! Photo by mixetto/Getty Images.

Thou shalt not cancel a card before thou hast opened a new one

Many people are surprised by how many credit cards I have, and I commonly get asked, “Don’t you need to cancel one card before opening another?” Absolutely not! In fact, canceling a card may actually hurt your credit score.

There are two main reasons for this.

(Image courtesy of FICO)

One, a large part of your credit score (30%) consists of your credit utilization ratio: how much of your available credit you actually use. If you currently have balances of $5,000, and $50,000 of available credit, your credit utilization rate is just 10%. If you then cancel a card with a $30,000 limit, your rate suddenly jumps to 25% (because your available credit is now just $20,000). That’s not quite in the danger zone, but still high enough to give a card issuer some doubts.

Two, another part of your credit score (10%) consists of your length of credit history, and part of this equation is the average age of your accounts. If you’ve had a card with no annual fee for five or more years, for example, do not cancel it. Make a few purchases on it each year (so the bank doesn’t close it) and let it continue to add to your history.

How to comply

Very simply, do not cancel a card unless doing so won’t hurt your credit utilization rate. If the card has an annual fee that you want to avoid, try to downgrade the card to a no annual fee version instead of canceling the card.

Membership Rewards points technically don't expire, but you could lose them if you close your account.
Membership Rewards points technically don’t expire, but you could lose them if you close your account.

Thou shalt not cancel a card and lose thy points and miles

Another hazard of canceling a credit card is forfeiting the points and miles you’ve earned.

On many credit cards connected to a specific airline or hotel chain, this isn’t an issue, as what you earn automatically transfers to that program’s account. However, other points and miles simply sit with the card issuer until you redeem them, including American Express Membership Rewards points and Chase Ultimate Rewards points. Be sure to redeem before canceling cards with these types of rewards, as they will disappear once your account is closed.

How to comply

Use the points before canceling the card, either by transferring them to a partner or redeeming them directly for travel, statement credits, etc.

Thou shalt not allow thy rewards to expire

While some loyalty programs (such as JetBlue, Delta and United) don’t put an expiration date on rewards, many others will wipe out your account after a certain period of inactivity.

That period is generally at least 18 months, though it can be shorter. My wife opened a new Bank of America WorldPoints credit card before we got married, and put all our wedding-related purchases on it. After the wedding, she left it alone. Little did she know that WorldPoints expire five years after they’re earned, so she wound up losing several thousand of them.

How to comply

Check out TPG’s tips on how to keep your points and miles from expiring. To be safe, I always recommend making at least one purchase annually on every card in your wallet and earning points or miles through a shopping portal for any types of points or miles for which you don’t have an associated credit card.

(Photo by Hero Images/Getty Images)
Spreadsheets and calendar reminders can help you stay organized. (Photo by Hero Images/Getty Images.)

Thou shalt not miss out on a sign-up bonus

Using a rewards credit card or travel credit card for day-to-day spending is a great way to boost your earnings throughout the year, but one of the biggest drivers of credit card applications is the sign-up bonus.

By not spending enough in the specified time frame (usually three months although this has been extended for some cards during the pandemic), you can miss out on a huge influx of points. Some things to keep in mind when it comes to these requirements:

  • The clock usually starts ticking as soon as your application is approved: The time frame to hit the bonus usually doesn’t start when you receive the card, but rather starts immediately upon account approval. If you’re unsure of that date, call customer service for your card and ask.
  • Annual fees, transferred balances and cash advances do not count:  For instance, if you got in on the latest offer for The Platinum Card® from American Express, the $550 annual fee (see rates and fees) will not help you hit the minimum spend threshold.

How to comply

Knowing the specific time frame and what counts is half the battle, but you also need to track spending. Spreadsheets, calendar reminders and money management tools can be very helpful for staying organized.

When dining out, be sure to use a card with a bonus for restaurant purchases. Photo by Matheus Frade on Unsplash.
When dining out, be sure to use a card with a bonus for restaurant purchases. Photo by Matheus Frade on Unsplash.

Thou shalt take advantage of category bonuses

Many credit cards give you bonuses for purchases at certain types of merchants, including restaurants, supermarkets and gas stations. For instance, I shudder when my friend pays for their dinner with a 1% cash-back card instead of the Chase Sapphire Preferred Card, which earns double Chase Ultimate Rewards points on dining, or the Chase Sapphire Reserve, which earns 3x points on these purchases.

If you have a card with bonus categories, be sure to use that card when making purchases in these categories.

Related: A complete guide to the best travel cards broken down by bonus category

How to comply

Reading the card agreement (or visiting the card’s website) to know the earning and benefits provided by your current cards is a great first step. You can also check out our guide to the best cards for each bonus category if you want a new card for a particular spending category.

Thou shalt not ignore cards with annual fees

If you’re new to this hobby, you may believe (as I once did) that cards with an annual fee are terrible.

However, many of these cards offer lucrative sign-up bonuses, ongoing benefits, and anniversary bonuses that more than cover the annual fee. In addition, many of them waive the annual fee for the first year, giving you a free one-year trial before you have to decide whether you should keep the card for the long term.

Related: Guide to credit card annual fees

How to comply

By visiting TPG, you’ve already taken the first step. Our expert analysis will help you maximize your earnings and rewards on these cards, including TPG’s monthly ranking of the top limited-time credit card offers. You can also check out our best credit cards page for a list of these (and other) great offers.

Frustrated businessman sitting at office workstation waiting while on smartphone. (Photo by Thomas Barwick/Getty Images)
You may be able to get a retention bonus when your annual fee comes due. (Photo by Thomas Barwick/Getty Images.)

Thou shalt pursue retention bonuses

Once you do take the plunge and open a card with an annual fee, there are still ways to avoid the annual fee.

If you don’t think the value you’ve received from the card justifies the annual fee, you can always call your card issuer when the annual fee comes due and ask about waiving the annual fee.

Remember that the issuing bank wants you as a customer, so it doesn’t want you to close your account. This is especially true during the pandemic when people are less likely to travel — and thus, make use of their card benefits. Many TPG readers (myself included) have received offers to keep cards open, including:

  • A waived annual fee (no strings attached);
  • Make X purchases in Y months and enjoy a waived annual fee;
  • Make X purchases in Y months and receive Z bonus points/miles;
  • Z bonus points/miles (no string attached).

Related: Pros and cons of downgrading your credit cards right now

I do recommend doing this only for cards that you would actually cancel without getting an offer. If you ask for it, don’t get it, and keep the card anyway, the issuer might flag you (or your account) as the person who cried wolf because they know you won’t follow through on your threat to cancel.

How to comply

Call the number on the back of your card when the annual fee comes up, and tell them that you’d like to cancel the card due to the annual fee. Then, see what happens.

Related: My Amex Platinum retention bonus: 20,000 Membership Rewards points

Earning Points and Miles credit card online shopping
Cards without foreign transaction fees can save you a ton of money when traveling abroad. Photo by @chibelek via Twenty20.

Thou shalt not pay foreign transaction fees

Many credit cards charge you a fee (generally 1 to 3 percent) for every purchase you make in a foreign currency or country. This includes purchases made abroad that the merchant converts to dollars for you (which you should never accept, by the way).

But, some credit cards waive these fees. Many of the premium travel rewards credit cards don’t have foreign transaction fees, but even some no annual fee cards like the Capital One VentureOne Rewards Credit Card waive foreign transaction fees.

How to comply

This one is also simple; get a card that waives these fees! Here are the best credit cards with no foreign transaction fees.

Bottom line

There are many things that you absolutely should (and should not) do in relation to your travel rewards credit cards, and hopefully this list of commandments has given you some food for thought, whether you’re looking for one of the best cash-back credit cards or a premium travel rewards card.

When the world is fully reopened again, traveling using the points, miles or cash back you earned is deeply rewarding (and satisfying). However, it’s important to make the most of every card you open and use on a regular basis.

Additional reporting by Chris Dong. 

For rates and fees of the Amex Platinum Card, please click here.

Featured image by Justin Paget/Getty Images.

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Editorial Disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

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