How to tell if you are using the wrong credit card

There is no such thing as a universal best credit card . The right card for you depends on your lifestyle, your goals and your credit history . For instance, if you are looking for travel rewards but your friend is building credit , the best card for each of you will differ greatly. And while there may not be one best card for you, there are many times a card can be wrong for a specific situation. Here are eight times you could be using the wrong credit card , and what you can do instead. You may have started out by building your credit with a secured card, student card or alternative card, but once your credit is in better shape, it may be time to upgrade. If you have used a starter card responsibly by keeping your utilisation rate low and paying balances in full every month, you may qualify for a card that is a better fit now. A different card could offer a higher credit limit, better rewards earnings and perks such as travel benefits. Some card issuers may automatically upgrade your card once you have reached certain thresholds, while others may not. Contact the issuer to check your options. New cardholders can often earn a welcome bonus, but usually with a caveat: you have to spend a minimum amount within a specific time frame to get it. Note the spending requirements for a card’s sign-up bonus and use the new credit card enough by the deadline. If you continue to pay with an older credit card that is already in your wallet, you face the risk of missing out on the bonus. A little planning can help. Think about big purchases you need to make, such as a car repair or a new laptop. Only one of those could be enough to hit the spending requirements for the sign-up bonus. It is true a store credit card can save you money, especially if you are a frequent, heavy spender at that store. However, the rewards earned with a store credit card are often only redeemable at that store, limiting their usefulness. Most shoppers would be better off using a general rewards credit card and earning more flexible rewards. Several cards have a top 5 per cent cashback rate in spending categories such as grocery stores, restaurants and petrol stations. The catch, though, is that you will have to do some work to earn that rate. In most cases, you will need to track categories: qualifying 5 per cent purchases may rotate quarterly, or you may have to choose your own categories. If you are spending outside of those categories with this card, you will probably earn a paltry 1 per cent instead of the 5 per cent you think you are earning. Plus, you could run into spending caps in those 5 per cent bonus categories; once you hit those caps, the rewards rate drops to 1 per cent. For those who find a 5 per cent card to be high maintenance, opt for one that earns a flat 2 per cent cash back on every purchase instead. Some issuers offer suites of cards in the same family and have names that are nearly identical. Perform a quick audit of your credit cards to make sure that they are the cards you intended to get. Cards that look and sound nearly the same may be worlds apart in terms of fees and rewards structure. Balance transfer cards can be excellent tools for paying off debt. They consolidate several debts into one place, making them easier to keep up with. However, if you are using a balance transfer card for everyday expenses as well, it will be hard to whittle that balance to $0. Plus, many balance transfer cards don’t come with rewards. Leave the balance transfer card at home, but take the cashback card with you — and be sure to make regular payments towards both. It pays to know the rewards rates for all your credit cards. Say you have two credit cards, one that earns 4 per cent on petrol and another that earns only 1 per cent. Using the 4 per cent card whenever you fill up would return $30 more if you spent $1,000 annually on petrol. That $30 may not seem like a lot, but small amounts add up. To help keep track of different rewards rates, you could label your cards with sticky notes or keep a small reference guide in your wallet. Often, you will have to keep spending caps in mind, too. Issuers typically cap earnings on their highest rewards rates after you reach a certain amount of spending in a particular category. Make sure you track your progress towards that cap and switch to another card with a better rate when you reach it — until the limit resets. Although they may look the same, a debit card is very different from a credit card. Credit cards offer protections and perks that debit cards do not. You can earn cash back and other rewards with credit cards that you will not get with a debit card, and it is often easier to recover from losing a credit card than a wallet full of cash. More importantly, responsible credit card use builds your credit score.