Finance

Personal finance resources are everywhere, but it can be difficult to identify where to start and how to access them. This information hub will provide you with a starting point to help you establish a stronger financial foundation.

Disclaimer: I am not a financial advisor and nothing written on this website is financial advice. This is for educational purposes only. Please due your own due diligence before making any financial decisions.

At its core, personal finance involves the management of your money and assets. Assets are things you own that have value, which may be converted into cash–this may include but is not limited to, your home, stocks & investments, vehicles, clothing, accessories, and collectors’ items.

What is Personal Finance?

Credit

Credit refers to a contractual agreement between a lender (“creditor”) and a borrower (“debtor”) whereby the borrower receives money or assets and agrees to repay the lender at a later date, usually with added interest.

Credit Score vs. Credit Report

It is important to understand that credit score and credit report are not the same thing. Credit score refers to a person’s creditworthiness (i.e. how reliable a borrower is likely to be) and is represented by a three-digit number ranging from 300 to 850. A credit report is a document that contains a detailed summary of a person’s credit history.

Understanding the difference between a credit score and a credit report is important because lenders may request one of them prior to doing any business with you. Checking your credit score is referred to as a “soft inquiry” (or “soft pull”) because checking your score does not affect you in any way. You can check this score as often as you prefer, though it typically updates once every 45 days. On the other hand, checking your credit report is referred to as a “hard inquiry” (or “hard pull”) and may negatively affect your credit score in the short term.

Components of a credit score

A credit score is a numeric number (300-850) given to a person to represent creditworthiness, i.e. how trustworthy someone is to doing business with.

A credit score may be made of several components:

On-time payment history
Credit utilization
Total credit limit
Length of credit history
Mixed accounts (e.g. mortgage, auto loans)
Number of recent credit inquiries

You may have different credit scores depending on the algorithm being used (e.g. FICO vs. VantageScore). Using the components listed above, each algorithm places a different emphasis or weight on how heavily each factor influences the credit score. Generally, the most important factors of any credit score include the following:

1. Making regular, on-time payments.

2. Maintaining a low monthly credit utilization.

A FICO credit score is a scoring model that considers different factors to determine your creditworthiness.

What is credit utilization?

Credit utilization is represented by a percentage. Credit utilization is the amount you spend in a month divided by the total credit limit of all your combined credit cards (hence, total credit utilization).

For example, if I spend $100 and my total credit limit is $1000, my total credit utilization would be 0.10, or 10% ([$100/$1000] * 100 percent = 10%).

Please note that the credit utilization that you have for each individual credit card also matters in determining your credit score. This is referred to as per card credit utilization. So, if credit card A has a 75% utilization but your overall utilization is 5%, it would be wise to lower credit card A’s utilization prior to the close date (“close date” is discussed below).

Why should you care about your credit score?

Credit lenders will often ask for your credit score prior to approving you for loans, credit cards, apartments, cell phone plans, and more. If your credit score is poor, a lender may deny you from receiving a loan or service. Even if you happen to get approved for a loan or service with a poor or mediocre credit score, the interest rate offered to you may increase (i.e. with a poor credit score, you will pay more than what you would have paid if you had a higher credit score).

How do you increase your credit score quickly?

Below are the different components of a credit score (reproduced from earlier) but with additional elaboration on healthy practices.

On-time payment history (heavily weighted)

Never miss a payment. Ever.
Setup autopay.

Credit utilization (heavily weighted)

Maintain a per-card credit utilization of about 1% (ideally less than 10% at the highest).
Maintain a total credit utilization of about 1% (less than 10% at the highest).

Total credit limit

Having a high credit limit across all your credit cards makes it easier to maintain a lower credit utilization. However, a high total credit limit is unnecessary for a high credit score.

Length of credit history (“average age of credit”)

The longer your credit history the better. If you can manage good habits, open a “no-annual-fee” credit card as early as possible.
The “average age of credit” refers to the average length of time all of your accounts have been open. Having a long average age of credit may help your credit score.

Mixed accounts (e.g. mortgage, auto loans)

Having a mix of different accounts

Number of recent credit inquiries
- The lower the number the credit inquiries the better

VantageScore is a credit score algorithm that was created by three credit bureaus--TransUnion, Experian, and Equifax. VantageScore is a competitor to FICO Score.

Banking

High Yield Savings Account

High Yield Savings Accounts (HYSA) are a type of savings account that offer much higher annual percentage yields (APY) on your deposits than traditional banks. Before choosing a high-yield savings account, consider the following:

Ensure that deposits are insured through the Federal Deposit Insurance Corporation (“FDIC insured”).

Banks typically insure up to $250k worth of deposits. If you plan to keep over $250k in a HYSA, consider opening multiple accounts under different banks to spread out your money.

The minimum deposit is needed to be eligible for the quoted annual percentage yield (APY) and to avoid unnecessary fees.

Some HYSAs (such as AMEX at the time of this writing) do not require a direct deposit or minimum balance.

What features are you looking for?

Some online banks such as Ally offer “savings buckets” to help budget and save toward different goals.
How liquid do you need your money to be? Some banks offer same-day transfers, while others may take several business days to process your deposit/withdrawal.

HYSAs offer variable yields. In other words, the yield you receive may increase or decrease over time.

Popular High-Yield Savings Accounts to Consider:

Wealthfront
Marcus by Goldman Sachs
American Express
Ally
Betterment
Citi Bank
Discover
Capital One

Certificates of Deposit (CD)

A certificate of deposit (CD) is another type of savings product that allows an individual to earn fixed interest on a certain amount of money after leaving that entire amount untouched for a fixed period of time. Not all CDs are equal–the term length of a CD typically ranges from 3 months to 5 years. When the CD reaches its full term length, the CD is said to “mature”.

Pros:

Safe investment as long as you don’t withdraw your funds prior to CD maturity (see cons)
The fixed-rate you receive is locked in and does not change over time
The return on your investment is virtually guaranteed, which allows for better financial planning
Can utilize CD laddering strategies to maintain liquidity and leverage changing interest rates.

Cons:

You must leave the entire lump sum untouched until the certificate of deposit matures, otherwise, you will receive a penalty on your withdrawal. The penalty amount may vary based on the remaining CD term.
If the fees from the early withdrawal penalty are greater than the interest accrued, then the financial institution may take the difference from your original principal deposit prior to giving you your funds.
May not grow as quickly as funds invested in the stock market or other investment assets.
Less liquid than HYSA, money market accounts, and checking accounts.

Money Market Account (MMA)

A Money Market Account (MMA) is a product that is offered by traditional and online banks, and credit unions. MMAs are interesting-bearing accounts that offer some of the benefits of both checking and savings accounts. Think of MMAs as a hybrid between a checking and a savings account.

Here are some of the benefits:

Allow you to earn interest on your deposits, hence “interest-bearing” (interest yield returns are typically greater than those offered by traditional savings accounts)
May provide you with a debit card for when you want to complete transactions
Allows check-writing against the balance in your account
FDIC insured up to $250,000

Here are some of the downsides of MMAs:

May require a minimum balance to avoid fees
Depending on the institution, they may limit the number of transactions per month. This rule used to be enforced by the Federal Reserve at six (6) transactions per month; however, since April 2020, the Federal Reserve no longer requires this rule though banks may still enforce this rule.

Note:

Money Market Accounts (MMAs) are not the same thing as money market funds.

What are the differences between MMAs and MMFs?

Credit Cards

Credit cards often carry negative connotations—money traps, instigators for poor financial decisions, and unnecessary burdens. Certainly, that doesn’t need to be true. While improper handling may land you in a deep hole of debt and take months to years to recover from, they can provide considerable benefits and award redemptions when used appropriately. Having a strong understanding of how to safely use credit cards is essential to set yourself up for success—start here to level up your credit card game.

1. Understanding Credit Cards

What are credit cards and how do they work?

Credit cards are bank-issued cards that, when used, allow banks to make purchases on your behalf. In other words, any time you make a purchase using the card (i.e. make a "charge" using your card), the bank is the entity that is paying for the purchase. Every month, the bank consolidates all the purchases and sends you a bill, which you will need to pay.

Having the right mindset

While you are technically borrowing money first and paying it back later (with most types of credit cards), it’s essential to have the mindset of paying for items as if the money is coming straight out of your bank account. Don’t purchase items that are unnecessary—especially luxury items—or things that you cannot comfortably afford with the funds you already have.

What are the benefits of owning a credit card?

The most important reason for using a credit card is fraud protection; if an unauthorized charge is made, you have the ability to dispute and potentially reverse the charge to your account. Credit card companies often require that you report the fraudulent charge within a specified time, so it’s important to ensure you’re notified of charges to your account as soon as they occur.

2. Credit Card Myths

Myth #1: Credit cards are more dangerous than debit cards

Credit cards are generally safer than debit cards regarding fraud protection. When you use a debit card, the funds are withdrawn directly from your checking account. On the other hand, charges made to a credit card are charged to the credit card company in the form of credit, which you’ll need to pay off later.

While debit cards often require inputting a passcode prior to finalizing a transaction, you’re still vulnerable if your card or passcode gets stolen. You must report cases of fraud within 2 business days to potentially limit your monetary liability, otherwise, you’ll be out of luck. On the other hand, credit card companies allow a greater time window to report fraudulent charges, per the Fair Credit Billing Act (FCBA).

Based on the FCBA, consumers have 60 days from the time they receive their credit card bill to dispute any charge with the credit issuer.

Tip: When you set up your card (credit or debit), enable mobile notifications to your device whenever a transaction is made. This will help you catch suspicious activity as soon as it occurs.

Myth #2: Carrying a balance helps you build credit

No. Do not carry a balance on a credit card whenever possible! Please refer to here where I talk about the different components of a credit score and how to increase your score.

Carrying a balance may actually contribute to a higher credit utilization on your record, which may negatively impact your score. Also, maintaining a high credit utilization will show credit issuers that you are a high-risk individual; to reduce their risk, some companies will engage in balance chasing, which means they may lower your available credit line while you pay off portions of your balance.

Important: Balance chasing may hurt your credit score because your credit utilization may remain high even while you are paying down portions of the balance. For example, if your credit line is $1,000 and you have a due balance of $1,000, your utilization is currently at 100%. If you pay $250, you would expect your credit utilization to drop to 75% ($750 divided by $1,000 = 75%); however, the credit issuing company may simultaneously lower your available credit line to $750, which may keep your credit utilization at 100% ($750 divided by $750 = 100%).

Myth #3: Having multiple credit cards is detrimental to your credit

When you apply for a credit card, many companies will do a hard inquiry or “hard pull” to request access to your credit file in order to see how risky of a client you are. Having a higher number of recent hard inquiries temporarily lowers your credit score. However, hard inquiries make up only a small portion of your overall credit score. At the same time, having more credit cards may increase your total credit limit across all your cards, making it easier to maintain a lower credit utilization and thus a higher credit score.

Myth #4: Closing unused credit cards boosts your credit score

This is not true; in fact, closing unused credit cards may actually hurt your credit score because your average credit age (e.g. the average age of all your credit cards) will decrease. In addition, you will have less credit available to spend, which may increase your credit utilization if your spending habits remain unchanged (remember: lower credit utilization is better).

To learn more about the components that make up a credit score, visit here.

Myth #5: Missing a payment immediately gets reported to the credit bureau

This statement is false. A late payment is reported to the credit bureaus if you fail to make your payment within 30 days after the due date. You must pay at least the minimum payment. Keep in mind that failing to pay by the due date may still result in a late fee or penalty.

3. Getting Started - Your First Card

Types of Credit Cards

Standard unsecured credit cards
Secured credit cards
Credit cards for students
Small business credit cards
Store credit cards
Charge cards

Standard unsecured credit card: This is what you typically think of when talking about credit cards. These cards give you a certain spending limit (credit limit) without having to give the credit card company a security deposit.

Examples: Chase Freedom Unlimited, Discover it Cash Back, Capital One Quicksilver Cash Rewards.

Secured credit card: These credit cards give you a spending limit (credit limit) that is equal to the amount you give to the credit card issuing company, which is similar to a security deposit. Secured credit cards are a great way to start building your credit history, especially if you have never owned a credit card before or have no prior credit history.

Examples: Discover it Secured, Capital One Quicksilver Secured Cash Rewards

Note: Notice that there are different versions of credit cards that have similar names. For example, Capital One Quicksilver credit cards exist in different forms such as a standard unsecured credit card, secured credit card, etc. Pay close attention to the type of card you’re signing up for and don’t get them confused.

Credit cards for students: These credit cards typically have the “student” in the name of the credit card. These cards are similar to unsecured credit cards in that they do not require a cash deposit prior to receiving the card. These cards are designed for students in that they are designed for students attending college and do not require a credit history prior to applying.

Examples: Bank of America Travel Rewards for Students, Discover it Student Cash Back.

Small business credit cards: Generally known as “business credit cards,” these cards are suited for business owners because they generally offer unique benefits such as higher credit limits, greater rewards potential, employee credit cards, and tools to manage spending across different cards.

Examples: Ink Business Unlimited, American Express Business Gold, and The Business Platinum from American Express.

Charge cards: Charge cards are similar to unsecured credit cards; however, charge cards do not have a specified spending limit (credit limit). These cards are great for those who have high spending requirements. Charge cards must be paid in full and on-time every month; therefore, minimum spending requirements and interest do not apply to these cards. While charge cards may not specify a maximum spending limit, they still have a maximum spending limit they may give you, which may change from month to month.

Examples: The Platinum Card (American Express), and American Express Gold Card.

Note: Although some people use the terms “credit card” and “charge card” interchangeably, they are technically not the same thing. As discussed earlier, a credit card gives you a pre-determined spending limit (aka “credit limit) whereas a charge card does not give you a pre-determined spending limit.

Types of Credit Card Sign-ups

Public Offers
Affiliate Links
Targeted Offers / Incognito Offers
Referral Links

Public offers: These are credit card incentives or bonuses that the general public has access to.

Affiliate links: Affiliate links are links generated by creators or persons who have a relationship with a company; clicking on affiliate links allows the beneficiary of the link to receive a bonus (typically in the form of "points” or “miles”). Sometimes affiliate link offers are higher than public offers.

Targeted Offers / Incognito Offers: Targeted offers are specifically offered to you and are typically higher than public offers. Incognito offers are offers that sometimes appear while using private web browsing and may be higher than public offers.

Referral Links: Referral links, otherwise known as reader referral links, are links that YOU can create, which allows you to receive a bonus for referring others to the particular product. The bonus is typically given as credit card “points” or “miles”.

My recommendation

I recommend that your first credit card have the following qualities:

No annual fee card (or, if it has an annual fee, it gives you the ability to downgrade to a no annual fee card in the future)
Sign up using a referral link or offer, whichever gives you the greatest sign-up bonus (SUB)
Apply for a card under a major bank or institution (e.g. Discover, Bank of America, Capital One, etc.) as opposed to a smaller or regional bank.

Choosing Your Card

For many people, the first credit card should be a secured credit card or student credit card.

These cards are good for those who have no credit history as they are typically easier to get approved for. The goal of these cards is to build your credit history to show credit lenders that you are a responsible customer who pays their bills on time.

Visit here for recommended cards based on card type: https://thepointsguy.com/credit-cards/best/

4. Getting Additional Cards

Having multiple credit cards can help you earn maximum rewards and points across a variety of spending categories–dining, travel, gas stations, etc. Your accumulated points can then be redeemed for cash back, or other rewards, depending on the specific credit card. In addition, some credit cards give you access to additional perks, such as travel credit, extended warranty protection, no foreign transaction fees, elevated sign-up bonuses, concierge service, and more.

Two different approaches:

Traditional Approach:
You consider your lifestyle and goals to direct you to a credit card that maximizes cash back or points/miles.
My Approach: I utilize a strategy that combines traditional methods with more nuance, taking into account various factors as outlined below:
1. My approach prioritizes acquiring Chase credit cards first due to the unwritten 5/24 rule, whereby Chase automatically denies individuals who have opened five or more personal credit cards in the past 24 months. The most valuable Chase credit cards to acquire first are those that award Ultimate Rewards (UR) points due to their potentially high value, as explained in the "Maximizing Credit Card Benefits" section.
2. Elevated signup bonuses (SUB): Apply for credit cards during elevated sign-up bonus offerings to accumulate a substantial amount of points or miles. Taking advantage of the high signup bonus is more logical than spending thousands of dollars to accumulate the same amount of points for.
  
  Example: A credit card may offer you $750 worth of points (at a value of one cent per point) after spending $4000 in the first three months of having a credit card. But, if you did not receive the signup bonus, you’d need to earn 75,000 points from organic credit card spending to receive the same amount. Assuming you receive 3 points per dollar spent, you would need to spend $25,000 to earn 75,000 points. In other words, I do not recommend obsessing over credit cards that give you 3x vs 2x points per dollar spent; instead, focus on the greater reward of high signup bonuses as they are easier to obtain.
3. Referrals: When other people sign-up with a credit card using your referral link, you may receive a certain amount of points based on the bonus requirements.
4. Travel Partners: I also consider credit card partnerships with different airlines or airline alliances, known as "travel partners." For example, American Express has multiple travel partners, one of which is Delta Airlines, while Chase Bank has multiple travel partners, one of which is United Airlines. If I frequently travel with a particular major airline, I consider credit card travel partners because I am able to transfer my credit card points to the travel partner of my choice.
5. Airline reliability: Furthermore, I prioritize airlines' reliability as a crucial factor when choosing a travel partner (consider the percentage of delayed or canceled flights).
  Visit here to see airline reliability data from 2023.

Note: If you are a responsible user and decide to engage in credit card churning, it is recommended that you do not apply for more than one credit card every three months. You do not want to draw unwanted attention and risk getting blacklisted. American Express is particularly known for having a low tolerance for these individuals.

You may also want to contemplate opening a checking account at the same bank where you hold your credit card. This action may help you establish a deeper relationship with your bank and possibly increase your chance of approval for a credit card. It is important to remember that some checking or savings accounts require a minimum balance to avoid incurring any unnecessary penalties or fees.

Earn points on rent

with a no annual fee credit card.

At the time of this writing, the only credit card that allows you to earn points through rent payments without incurring a transaction fee is the BILT World Elite Mastercard.

Click here to use my referral link

Note: Using my referral link is at no cost to you and helps support my content.

Rent Day

BILT designates “rent day” as the 1st of every month. Rent day is special because the point multiplier is doubled (except for rent payments). In essence, the point multiplier for travel increases from 2x to 4x, and points on dining increases from 3x to 6x.

Redeeming Points

The points you accumulate through BILT can be used toward future rent payments. However, credit card enthusiasts often advise against this method of redemption because the points are worth very little when you exchange them. When you redeem your BILT points using this method, your points will typically be valued at less than one cent for every point you trade.

Instead, you can transfer your points to another company with which BILT has a relationship. The companies that maintain a relationship with BILT are known as travel partners. Transferring points to travel partners is often the best way to get the greatest value out of your points.

6. Maximizing Credit Card Benefits

Transfer your points out to transfer partners. Note that not all points transfer at a 1:1 ratio.
Visit here for an Airline Transfer Partner Guide.
Transfer points when there is a point transfer bonus being offered.
This article demonstrates an example of American Express offering 30 percent more points when transferring to Virgin Atlantic.
Book flights on partner websites.
For example, if you go to the United Airlines website and search for flights, you may sometimes see something such as, “This flight is operated by ANA Airlines.” Meaning, if you book that flight, you will be flying on ANA Airlines as opposed to United Airlines. But if you visit the ANA Airlines website to search for the same exact flight, you may see it listed there as well. If you chose to redeem points/miles for the flight on both websites, the required points for the flight may differ on each website. So, transferring your points/miles to the airlines with the lowest required point value may save you a ton of points/miles.
Use your points/miles for business or first-class airline tickets. These generally offer you the greatest value in terms of cents per point. For a baseline, using points for cash back are generally redeemed for one cent per point ($0.01/1 point).
Status Matching: Some hotels have partnerships with other casinos or cruise lines. Participating members may “match status” by providing you with a certain type of membership status simply by showing that you hold a membership status at one of their partner companies. For example, if you have Hyatt Globalist status, you may be able to acquire MGM for gold status.

Status Match Merry Go Round: Match statuses between various hotel properties to take advantage of all the membership perks at different hotels, casinos, cruises, and more.
Example 1: Hyatt Explorer and Hyatt Globalist status will give you MGM gold status.
Example 2: Wyndham Earner business card will award you with diamond status and will match Caesar’s Diamond status.

Arbitrage: Arbitrage is the simultaneous purchase and sale of an asset within two different marketplaces to profit from the price differences.
How does arbitrage pertain to credit cards?
Certain institutions offer monetary bonuses upon signing up for a credit card and reaching the spending requirement within a given time frame. At the same time, merchants may charge credit card processing fees on their online portal when you use a credit card, which is typically 1.5-3% of the transaction amount. Some individuals understand that acquiring a signup bonus provides a return greater than the credit card transaction fee and therefore still choose to pay with a credit card.