Credit cards may deserve 2nd chance

While paying off $1,700 in credit card debt in 2014, Jamie Griffin cut up his card. To tackle the remaining $90,000 in student loans he and his wife carried, he read personal finance experts’ tips and turned to cash and a spreadsheet to budget. Now that most of their debt is paid off, he’s giving credit cards a cautious second chance.

Griffin has come to see credit cards as a way that he and his wife, Jenna, who are both teachers, might defray the costs of travel. Instead of immediately applying for a travel credit card, though, the 31-year-old from Duluth, Minnesota, let his wife’s longtime rewards credit card lead the way as they transitioned from using cash to credit for most purchases.

“We wanted to practice to make sure we could,” Jamie Griffin said.

Rewards credit cards generally require a credit score of 690 or higher. They can earn cash back, points or airline miles in specific categories or on everyday spending. Rewards rates vary by card and some also offer sign-up bonuses with introductory zero percent interest rates for new cardholders.

Paying off debt is a worthy goal. But if you later stop using a credit card, it can hurt your credit scores. That’s because credit utilization and length of credit history are key factors in the calculation of those scores, according to FICO.

Another factor in your credit score is credit mix, which might include a mortgage or car loans, for example, and also credit cards.

If you’re ready to give credit cards a second chance, here’s how to use a rewards credit card and maintain good credit:

• Pay your bill in full and on time every month.

• Don’t stray from your budget just to earn rewards.

• Keep charges below 30 percent of your available credit.

• Use your credit card as a budgeting tool to track your spending and review your purchases.