To those unfamiliar with the nature of credit scores, it can make perfect sense to assume that the fewer loans one has, the better their credit score will be. Indeed, having a low amount of debt is an important factor in maintaining a high credit score. Nevertheless, there is also a component of an individual’s credit score that takes into account the different types of loans one has.

How Credit Scores Work

There are several different credit reporting agencies, however the most important credit score is the one generated by the Fair Isaac Corporation, commonly known as FICO. Although FICO never releases the exact formula that they use to generate these scores, they do disclose some general parameters. For example, FICO has made it known that approximately 10% of an individual’s credit score is determined by the types of credit used. The different types of credit can include car loans, home loans, student loans, and revolving accounts such as credit cards. The more types of credit used, the higher a person’s credit score can be.

Why More Types of Credit Improves Credit Scores

Although counter intuitive, a person who has many different types of loans will have a higher credit score than a person who does not, all other factors being equal. To FICO, a person who demonstrates a reliable payment history in many different areas is inherently more credit worthy than someone who has only been responsible for a single type of loan.

Should People Take Out More Loans Just To Improve Their Credit Score?

Although being extended different types of credit improves one’s credit score, it does not necessarily mean that people should be encouraged to take out more loans just for that sake alone. The most important components of the FICO score continue to be a person’s payment history and the amount of debt that is owed. Many people continue to enjoy excellent credit despite the fact that they never borrowed money to pay for their education or their car. It is also a popular misconception that a higher score is always better than a lower one. Actually, once a person’s credit score reaches a threshold where it is considered Excellent, further improvement does not increase their opportunity to be approved for additional credit cards or to receive more favorable terms from other loans. That said, consumers who have less than Excellent credit and do not hold any credit cards can benefit from receiving opening a revolving charge account, so long as they control their debt and maintain an excellent payment history.

While many rewards credit cards are tied to an affiliate’s loyalty program, some banks offer their own proprietary points system for use with their credit cards. Integral to these points programs are a means to redeem the currency for products and services. These programs can also allow customers to make purchases at select merchants in order to earn additional rewards. Chase’s Ultimate Rewards mall allows customers to redeem points earned and to earn bonus points for making purchases at featured retailers.

How The Ultimate Rewards Mall Works

Chase’s best credit card offers fall into three different card families that are eligible to participate in their Ultimate Rewards program, their Freedom cash back credit card, Sapphire, and Ink offers which that already earn Ultimate Rewards points from their purchases. When it comes time to redeem these points, cardholders can visit the online shopping portal to redeem points for travel, cash back, experiences, merchandise, and gift cards. Points are generally worth one cent each with most redemption opportunities, but cardholders will receive a 25% bonus when making travel reservations through the Ultimate Rewards web site. (more…)

Everybody knows that you can use your cash back rewards card to save money on your everyday purchases. Indeed, banks compete fiercely with each other in order to offer customers the best cash back return rates, with their best offers only being separated by fractions of a percentage point. At the same time, most card issuers offer their customers and online shopping “mall” that will return far higher rates of cash back on purchases from specific merchants. Discover offers its ShopDiscover online shopping rewards portal that will return a 5% to 20% cash back bonus on each purchase.

How ShopDiscover Works

The shopping portal is available to all Discover customers that hold one of their cash back reward cards. Cash back card holders are eligible for 5% to 20% cash back, depending on the merchant; however miles cards members will only receive double miles. Cardholders will first need to log in to their account with their normal user ID and password. From there, they can choose to shop at over 200 different merchants. 

Each merchant is listed with offer details which specify the rate of cash back and any other benefits and limitations. In addition to bonus cash back, some merchants even offer free shipping for purchases above a specified spending minimum.  Limitations can exclude charges for tax, shipping, service fees, and gift cards.

Fortunately, all offers are in addition to the normal cash back or miles received for spending on the card member’s Discover cash back rewards card. Cash back bonuses will be credited to the cardholder’s account within eight weeks of purchase; however, in the case of hotel stays and cruises, the bonus will take eight weeks from the date of use.

What Types Of Retailers Are Listed

While there are many smaller retailers featured in their online shopping mall, there are also some major outlets including department stores, home improvement stores, office supply chains. For example, purchases at JC Penny are eligible for 10% cash back, 5% cash back at the Home Depot, and 5% at Office Depot. Finally, there are numerous specialty retailers in the areas of apparel, travel, sporting goods, electronics, and gifts. In particular, Barnes and Noble and Nike both offer a 15% bonus.

Who Can Benefit From Using ShopDiscover

Discover customers with a reward card would be wise to familiarize themselves with the list of merchants in the ShopDiscover mall. Online shopping has always held an advantage in convenience while usually saving customers the cost of sales tax. While the savings offered to Discover’s cash back card holders can be very significant, the double miles offered to miles card holders is far less so. By adding an additional bonus for online shopping at popular merchants to cardholder’s existing cash back benefits, ShopDiscover is a valuable asset to their customers.

Frequent flier miles and other loyalty points will always be devalued over time, but cash back is the ultimate credit card reward. Like most other banks, Citi offers a variety of cards that return different levels of cash back based on various merchant categories.  Beyond the standard cash back returned, Citi offers additional rewards for purchases made with merchants in their Citi Bonus Cash Center.

How This Program Works

There are four Citi cash back credit cards that are eligible to participate in the Citi Bonus Cash Center; Citi Dividend World MasterCard – their best credit card offer for rewards – ,  the AT&T Universal Savings Platinum Card, and both the Citi Dividend Platinum Select Visa and MasterCard for College Students. Cardholders must then log into their Citi credit card account online before visiting the Citi Cash Bonus Center. There, card holders can link to hundreds of popular merchants. While each individual online store offers a different percentage of cash back, the average is 5%. Once a purchase is made, the cash back earned will be visible online within 45 days, however it will take one to three statement cycles before that amount is credited to your account. The bonus cash back earned is in addition to the cash back rewards normally earned from purchases. (more…)

With the price of gasoline remaining higher than anyone really wants to pay, it can be tempting to get a gas station credit card which offers rewards just for filling up your gas tank.  Why wouldn’t you want to save some money for buying gas – something you have to buy anyway?  The theory is good – being rewarded for a purchase you can’t avoid making – but there are some problems with gas credit cards that make them less useful than you might think. Consequently, even the best credit cards tied to specific gas stations pale in comparison to mediocre credit card offers.

Here is why you shouldn’t get a gas station credit card:

Most gas station credit cards will only offer good rewards when you get gas at a specific gas station.  This means every time you have to fill up at a different gas station, you lose your chance to get rewards or get much lower rewards for the purchase. Additionally, a large number of gas station credit cards are not part of the Visa or MasterCard network and can only be used at the gas station you got the card. This makes them utterly useless if you need a general purpose credit card. (more…)