Todd Baldwin has enough miles of credit card airlines to travel for free between Seattle and Europe. The 28-year-old millionaire likes to open new credit cards, especially those with registration vouchers, air miles and cash back.
But Baldwin, who today estimates he opens about two new cards a year, didn’t start out as a credit card optimizer. Growing up, Baldwin was raised by a single mother who worked various jobs to feed three children. Seeing this, he felt motivated to make sure he never had to worry about money.
“That’s how I had the fire under me because I knew I didn’t want to fight when I was big,” Baldwin told CNBC Select.
In his younger years, Baldwin associated credit cards with debt. But he quickly learned how useful they can be after getting his first credit card (an insured card) during his sophomore year at Western Washington University.
Your first tip for young adults is to start building a credit history as soon as possible. It will be useful when you want to apply for a loan or take out a mortgage in the future.
“I didn’t know there were a good chunk of credit cards until I started researching more,” Baldwin says. When you charge your credit card for expenses, pay them in full before the due date. This way, you avoid interest charges while also working to improve your credit score.
Promising that he would never charge more than he could afford, Baldwin created a set of guidelines to follow when using his credit cards for daily shopping, travel, and more. This is how you manage your 15 credit cards.
Keep only 1 credit card in your wallet at a time
Baldwin may have 15 credit cards in his name, but he only keeps one in his wallet and the rest in a safe at home.
He points out that the wallet card is usually a cash return card that pays between 1.5% and 2% on each purchase. Recommend these types of rewards with credit cards or an interest-free period, such as a 0% APR credit card.
For those who want to have both, the Citi® Dual Cash Card offers zero interest for the first 18 months for balance transfers (13.99% to 23.99% later; N / A on purchases) as well as a 2% cash back: 1% on all eligible purchases and an additional 1% after paying your credit card bill.
Citi® double effective card
In the safe place of Citi
2% cash back: 1% on all purchases and an additional 1% after paying your credit card bill
0% during the first 18 months in balance transfers; N / A for shopping
13.99% – 23.99% variable in purchases and balance transfers
Balance transfer fee
Foreign transaction commission
Credit is needed
Do not close credit cards
Although Baldwin stores most of his credit cards in a safe, he never closes any of them, especially the older one.
Closing a credit card may cause your credit score to decline temporarily as you lose the credit limit available in that account and your overall credit usage rate increases. Since a good or low usage rate means having low credit card balances and high credit limits, a closed credit card increases your usage and affects your score.
Instead, keep your credit cards open and active. Leaving them inactive may indicate to the issuer that you no longer use the card and may close your account. To ensure that you use your credit cards regularly, even if they are stored in a safe, you cover a small recurring cost, such as a monthly subscription or a streaming service, which automates payment for each month.
Automate credit card bill payments
Baldwin knows that making timely bill payments is the most important factor in getting a good credit score, so he makes sure you always pay your credit card bills before the due date.
To ensure this, Baldwin automates your monthly payments so that money comes out of your bank account at the same time each month and you don’t have to think twice about remembering to do it yourself.
In fact, when it comes to paying bills, such as utilities, at the six rental properties you own, Baldwin puts as many bills as he can on a credit card, and then automates credit card payments each month for help him get a credit score. For those interested in the Citi® Dual Cash Card mentioned above, following Baldwin’s guidelines would also mean putting money in your pocket, as you earn cash when you pay your credit card bill.
It never carries any credit card balance
Having a balance on your credit card to increase your credit score is a common myth. When you have a revolving balance each month on your credit card, accrue daily interest and consume available credit.
To prevent you from ever paying interest, Baldwin pays off all credit card balances each month.
Avoid credit cards with annual installments
While some of the best credit cards come with annual fees, Baldwin only has one that pays an annual fee.
His advice is to avoid cards with annual fees unless the benefits of the card outweigh what you have to pay to have it. For example, Baldwin uses its only annual fee card, an airline credit card, to book travel, as it includes a supplementary fare that offsets the cost of the annual fare.
To help you decide if a new card is worth the cost, calculate how much money you should spend annually on the card to match the annual fee.
Learn more: The best credit cards without an annual fee for September 2020
Don’t strive to earn a welcome bonus
“It’s important to never spend to spend $ 1,000 to earn $ 300, because they lose $ 700,” Baldwin says.
While Baldwin likes to take advantage of generous credit card registration bonus offers, he doesn’t spend money that would otherwise not just get points, miles, or cash. Instead, wait until you have a big purchase to do it anyway before signing up to get a credit card to receive the welcome voucher. Knowing that you have expenses coming up, either to supply one of your rental properties to list on Airbnb or to repair your car, you are more likely to get bonuses from the new card in a way that works with your budget.
Check your credit score every two months
Because Baldwin pays his bills on time and never spends more than he can pay on his credit cards, he doesn’t care where his credit score is. However, check your score for free every two months, especially before applying for a mortgage on a new real estate investment.
In fact, when Baldwin is in the process of approving to buy real estate, he will avoid applying for a new credit card. He knows that the hard research that occurs when the card issuer pulls out his credit report immediately marks his score temporarily and he wants to have the best possible score when lenders check his credit.
To check your credit score, Baldwin uses the Credit Karma app, but there are many resources available for consumers to access their credit score.
You do not need a Capital One cardholder to use Capital One’s CreditWise®, which is provided free of charge by VantageScore from TransUnion, one of the top three credit bureaus.
Capital One’s CreditWise®
CNBC has collected information about CreditWise independently and has not been reviewed or provided by the company prior to publication.
Supervised credit bureaus
Credit score model used
Exploring the dark web
Editorial note: The opinions, analyzes, revisions or recommendations expressed in this article are exclusive to the CNBC Select editorial staff and have not been reviewed, approved or approved by any third party.