[MUSIC PLAYING] EMILY BIGHAM: Hi, and welcome to the podcast MakingCents brought to you by Navy Federal Credit Union. I'm your host, Emily Bigham, and each week I'll be taking your questions to the experts to help you make sense of your money, pun intended.
Welcome, everybody. Today, we're going to be talking about credit cards. With a wide range of credit card options out there, we're going to break down which Navy Federal card may be right for you. So here with me today is my colleague, Rick. Rick and I work in credit cards together, so this is really fun for me, one of my favorite topics. So welcome. Rick. Can you talk a little bit about your role in credit cards and your background with Navy Federal?
RICK: Sure. Well, it's great to be here, Emily. I am the assistant vice president of our credit card products, so that includes when we have product development, modifying of our products, our acquisition strategies, our offers that we go out to attract members to come and shop with us, and then all of our loyalty engagement efforts, so those who receive some of those seasonal spending gifts and different offers, as well as our relationships with our network partners. So if you have a visa, Mastercard, American Express, we're also managing all the functionality with those networks.
EMILY BIGHAM: Great, nice, so lots of options out there, and you can definitely speak from experience. So let's start with the basics. If this is your first time shopping for a credit card, what should you be thinking about?
RICK: That's a great question. It really comes down to, what is it that you have in terms of your needs for a credit card? I know many of our members are either new to credit or repairing their credit history, and often a secure card might be the best option for them. And that requires a deposit up front, but with that deposit, you're getting access to all the great benefits of our credit cards.
Actually, to where I started with my credit card journey, if I think way back to college, a local credit union that was on campus, went, opened my card there. It wasn't a large line but was able to use that to fill up my truck. And through on-time payments and just using up to that 30% of your credit line, I was able to raise my credit score pretty quickly. So that's a good option for those members who are in that situation.
And then we have other great credit card options, so if you have existing balances, need to pay those down, we have a low-rate card. In fact, it's industry-leading, 11%, which is pretty good with where the prime rate is these days. And that platinum card is a great option for our members looking to pay down. Especially the summertime, many of us are maybe moving, making plans for big purchases, and that can really help you out in those situations. But I know most of us are probably interested and always reading about the rewards cards that are out there. We got a lot of great options there as well.
EMILY BIGHAM: So just breaking it down, when you say "existing balances" and you can transfer them over, can you talk a little bit about what you mean by "balances"? Where would those balances be held, and how is that really-- just from a very basic beginner standpoint.
RICK: Oh, definitely, definitely. So if you have used other credit cards out there and you have not paid off that full amount of those purchases on your prior statements, you have that existing balance, and you can balance transfer that to a new Navy Federal credit card. So there's great information on our website that kind of explains the process for that. Or you can call in and talk to one of our member service reps, and they can walk you through the process.
But effectively, that balance with the existing card will be paid off and transferred to your Navy Federal credit card. And there's no fee associated with that, which is really unheard of within the industry. Most of the time you're going to be paying 3% to 5% of whatever that balance that's transferred is, and so if you think of for every $1,000 that you're moving over, you're going to be paying up to $50 per $1,000.
So that quickly adds up and not only that-- most other cards require you to pay that fee in your first minimum payment following the transfer. And again, we don't charge that at all Navy federal, so it really helps you start to pay down that high credit card debt that you may have.
EMILY BIGHAM: That's great, too, and I think a lot about the rates. The rates are really high. Prime rate-- we're reading about that all the time. Your card with a bank will probably have a higher rate than a Navy Federal card, isn't that right?
RICK: Oh, definitely. Average credit card rate right now in the US is 24% to 25%. The highest our rates can ever go is 18%, so you're talking 6% savings there. And even if you are able to qualify for some of the lowest rates we have, we're going to beat the nearest competition by over 2%, which really adds up over time.
EMILY BIGHAM: Yeah, so you're saving money on the no fee when you transfer your balance, and then you have a lower rate if you need to take a couple of months to pay it off. So it sounds like a good deal. OK, so let's switch over to rewards. What makes Navy Federal cards stand out from a rewards perspective?
RICK: So that's a great question. One of the big things about our rewards cards is the rewards you earn-- they don't expire, and we don't devalue them over time. It's kind of a bit of a trick sometimes with some of the other competitors is that the value you think you're getting in rewards changes over time, so it's very transparent, all of our rewards programs.
We offer great redemption benefits, so if you're looking for travel, you can redeem your rewards points for travel or different items within our catalog, gift cards, all of those options. There's a self-service portal for redeeming for that. And of course, we have our cash back, and so that's a very easy process within logging on through your Navy Federal account and being able to easily redeem for those statement credits.
EMILY BIGHAM: So which do you prefer, cash back or rewards?
RICK: So I'm one who tends to go for cash back. I like those flat cash back cards where I don't have to think about trying to apply where I'm going to earn rewards the most for all different merchants. But we definitely have many of our members who want to take advantage of some of the higher earning power of, say, our flagship card, which can earn 3% back on travel and 2% on everything else. So that's a great option for those who are really looking to maximize rewards and put a little bit of extra effort in.
EMILY BIGHAM: Great. So Navy Federal-- we support the military. Is there anything special for the military or any recruits?
RICK: Oh, definitely. So within our military program, we have for those who are at the Academy or basic training a bunch of special offers of 0% on purchases as well as balance transfers for those who signed up through that program. And not only that. You're often on base, making purchases at your military exchange. You can earn 3% back at the military exchanges, so that's a great way to-- at the commissaries and everywhere else that you would be spending as an active duty servicemen and women to take advantage of our programs.
EMILY BIGHAM: That's great. That's really great to give back. All right. Switching gears to qualifying for a credit card, so you mentioned the secured card. What does that process look like? And you also mentioned a deposit. Is there a specific amount of deposit that a member should be aware of?
RICK: That's a great question. The process is that when you go through the application, you have to fund that security deposit, and so you want to make sure to have at least $200 available to establish that secured card. And so it really comes down to how much of that credit line do you want to have, what type of spending power are you able to establish upfront. But it's a pretty straightforward, seamless process, especially if you have that relationship with Navy Federal and have your checking account already established with us.
EMILY BIGHAM: And when you submit an application, we pull your credit, so that is a hard inquiry on your credit bureau. Is there anything that a member can do beforehand to gauge whether or not they think they might qualify or what card might be right for them?
RICK: Oh, definitely. So we have a prequalify tool, so if you go into navyfederal.org and look within the Credit Card page, a Prequalified button is right there at the top. And when you go through that process, it will ask you for a little bit of information, and upon filling that out, it's not going to go out to the bureaus, and there's no hard pull at that point.
But it will let you know, are there other unsecured options that you may qualify for? And so that's a great way to gauge before you decide to make that official application, and if you have any questions about the process, feel free to call us. All of our member service reps are able to talk you through that process as well.
EMILY BIGHAM: Nice. So we've talked a lot about, from a beginner standpoint, the best ways to understand how you can qualify and if you qualify and raising your credit score. But for the more seasoned credit cardholders who might have one or two credit cards, what do you think is the number of credit cards that you should have? And kind of as a follow-up, when is a good time to get an additional credit card if you are a seasoned credit card holder?
RICK: Another great question-- there's no magic number of credit cards. Some industry experts may say, five to six is something that's appropriate. But really, what it comes down to is making sure that you have enough credit line for all the purchases that you want to make, and so, again, I mentioned earlier that 30% utilization, meaning say you had $1,000 credit line, you were going to be using more than, say, $300 of that.
So if you have any large purchases coming up, it's probably a good time to look at, are you going to go above that threshold? And maybe it's time to open an additional card. Also, is an upcoming purchase going to be in a specific category that you want to earn additional rewards in? And so go ahead and start to weigh all those in as you decide whether or not another card is appropriate for you.
But I'll tell you, the one thing that is really important above all else on the number of cards is making sure to keep up with all your payment due dates. Your payment history is the largest contributing factor to your credit score, so you want to stay on top of making sure that you have on-time payments.
EMILY BIGHAM: To make on time payments, is there-- can you set up a recurring payment? Is it important to just make the minimum payment, or do you recommend making the full payment each month?
RICK: So ideally, it would be making that full payment if you can, but really, it comes down to making sure that the payments on time. So if you need to make just that minimum payment, we have a lot of tools set up to assist you with that, so you could select to have that automatic payment withdrawn from your checking or your savings account. And that is a great feature, that you don't have to always remember to do that if you're able to put that setting in place.
EMILY BIGHAM: So recently, my parents had to pay for my sister's wedding, and they were asking me about Navy Federal credit cards and getting a new credit card, and you were just speaking about thinking about upcoming experiences and opening new cards. It probably sounds like a good idea to get additional credit so you don't go above the utilization when you're planning for something. How important is that utilization if it's just for a brief period of time?
RICK: Well, for a brief period of time, it may just temporarily weigh down on your credit score, but you never know how long are you are you going to need to keep that balance out there and pay over time. So that's where I really urge all of our members as they have different things that come into play. I know sometimes there's those unexpected expenses that come up. So your auto repair or some type of home repair, and you need to put that purchase on a card-- those are the times that you really want to consider and start shopping for a new card.
And when you're doing so, there's all kinds of sign-up bonuses that are out there, But be really careful with what you're looking at and making sure you do a little bit of research about the product so that qualifying for those promotions isn't going to put you in a bad place.
EMILY BIGHAM: Yeah. And at Navy Federal, we have a website called Member Deals where we can unlock more retailer discounts, so can you explain a little bit about how Member Deals works?
RICK: Sure, no problem. So Member Deals is a great option for our members to go and check periodically on purchases with certain merchants they may be spending with anyways. And so through navyfederal.org, within the options that are-- the Card Management, you can go and look at different discounts that merchants are offering, so home improvements, any of those big popular merchants that you may have a large upcoming purchase with.
And they can give you from 1% to 5% back on those purchases, and it really comes down to following a few clicks from the Member Deals page, and then those discounts are automatically applied to your purchase.
EMILY BIGHAM: Nice. I like to look at Member Deals for specific holidays when I've forgotten maybe a gift, like an anniversary or Valentine's Day or a birthday. It's kind of fun to go shopping in there. It's also really easy to redeem the cash back, I found, so I'm also a cash person. OK. So Rick, is there anything else that you want to mention about our credit cards here at Navy Federal, anything special?
RICK: Oh, definitely. So there's a lot of other benefits to our cards that I wanted to call out. Some of those-- I know many of our members are needing to travel either for vacation or to visit family members internationally, and so we don't have foreign exchange fees on our cards. So it's a huge benefit to those who are going to be abroad, and those fees can quickly add up as you're traveling.
Also, I want to call out-- fraud is kind of a big topic that we're reading about these days, and so our Navy Federal fraud team has great strategies in place to help identify and mitigate those types of things against our cardholders as it becomes more sophisticated. And so just know that we're always here to support you as a member and as a cardholder, and you can feel confident in being able to leverage our credit card wherever it is that you need to purchase.
EMILY BIGHAM: And so another last question for you-- is it bad to close a credit card? What are your thoughts on that?
RICK: So it really depends. What I will say is one of the earlier cards you set up in your credit history-- try to keep that open. The length of the oldest card in that average age of your wallet is an important factor. It can be 15% to 20% of your credit score, and so personally, the card I opened after college, when I set up my first professional job-- and I still have that open.
So that's over 20 years ago that that card was opened, and it's something that it's been a huge benefit to me and being able to keep open and have a positive contribution to my score. So just really consider, if you're going to close a card, maybe one that's a little bit younger in your wallet versus one of those that could have more of an impact on your score.
EMILY BIGHAM: Yeah, and I would also recommend, even if you don't use that card as your maybe top-of-wallet card, use it every once in a while because I think there are some issuers who may decrease your credit line or even close that card. So I have a similar story. In college, actually, I got a credit card just to pay for gas for my car, and I've had that open ever since. And I think it's actually-- the product changed a few times. But it helps me a lot with my credit score, so I keep it open.
RICK: Yep. No, definitely. And something that you may want to explore before closing the card is often, including Navy Federal, you can do a product upgrade, meaning you can change your product from-- your existing card from one type to another. So that might be an option as your needs change and you want to keep that original account open. You can explore those options.
EMILY BIGHAM: Nice. That's a great benefit for members. OK, Rick, so where can Navy Federal members find out more about our credit card resources?
RICK: So great question. Our main page for credit cards, if you look at the header at nfcu.org, is the place I point everybody to. We have a ton of great content also on MakingCents in terms of thinking about different aspects of managing your credit and your credit cards, so you always can go there.
And be on the lookout-- we are always putting preapproval offers out there for our members, and so those are really our largest offers that we can extend to you. And so definitely take advantage of reading those emails, our mailers that we send out, and it's part of that preapproval.
EMILY BIGHAM: Great. Nice. Well, thank you, Rick. Thanks for coming on. It's always fun to talk about credit cards with an expert, so thank you again.
RICK: Thank you so much, Emily. I've enjoyed it.
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ANNOUNCER: Navy Federal Credit Union is federally insured by the National Credit Union Administration. This podcast is intended to provide general information and shouldn't be considered legal, tax, or financial advice. It's always a good idea to consult a tax or financial professional for specific information on how certain laws may apply to your individual financial situation.
References to and participation with the military community does not constitute organizational endorsem*nt. Navy Federal is an equal housing lender. Navy Federal Credit Union-- our members are the mission.
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