A 34-year-old entrepreneur with more than 10 million credit card rewards points knows what it takes to maximize rewards, while still maintaining excellent credit.
Chris Hutchins, a former Google employee and owner of the financial-planning company Grove, is an avid credit card user with 16 credit cards and the rewards points to show for it. For the past decade, he's been working toward his goal of earning 10 million credit card points and recently surpassed that milestone.
"I'm a pretty crazy credit card points optimizer," he tells CNBC Make It.
Hutchins has a credit score of 817, which is no easy feat considering all the work that goes into managing over a dozen cards. However, he clearly has a handle on the best ways to keep up with all those credit cards, while still benefiting from earning an insane number of rewards points.
While you may never accrue over 10 million credit card rewards points, you can follow Hutchins' three key credit card best practices.
"Make sure that you're able to get to a place with your cash flow that you're paying off your credit cards each month," Hutchins says.
Payment history is the most important factor of your credit score, making it crucial that you always pay your bill on time. In addition to timely payments, you should make it a goal to pay off your balance in full each month.
This prevents you from accruing interest — which can be pretty high on rewards cards — and minimizes the chances you'll fall into debt. Hutchins stresses the importance of paying down your credit cards, especially if you want to reap the rewards many cards offer:
"There's no amount of points that is worth taking on interest payments for your credit cards. So before anyone gets into the 'points game,' if you will, make sure you are comfortable with paying down your credit cards and paying them off in full each month."
Autopay is a helpful tool that can ensure payments are made on time and in full. You can also set up payment reminders through your card issuer and on your personal calendar.
Closing a credit card may seem like a harmless action, but it can have adverse effects on your credit score. A May 2019 Bankrate survey found that 61% of American credit cardholders said they had cancelled at least one credit card, but just 42% knew that canceling a card typically decreases your credit score.
Experts generally agree that it's not a good idea to close a credit card since your credit score can drop. Cancelling a credit card negatively impacts your credit utilization rate (CUR), which is the amount of credit you use divided by the amount of credit you have available across all your cards.
Before you close a credit card, you should ask yourself some questions about why you want to cancel the card. Generally, it's a good idea to keep the card open, but there are are few exceptions, one being a card having a high annual fee. Hutchins recommends you downgrade to a no-fee card. You can also call your card issuer and ask for the fee to be waved. It won't always work, but it's worth trying.
"Earning points is not free," Hutchins says. You have to make purchases with your credit card in order to get rewards. And, there's a fine line to walk in terms of charging too much on your card just to maximize rewards earnings.
Hutchins urges cardholders to spend within their means and to avoid going overboard just to earn rewards. Overspending can lead you to fall into debt, which causes you to incur high interest charges and hurts your credit score.
"If you go buy a bunch of stuff you don't need just to earn more points, you're actually going to be behind," Hutchins explains. "So, I would say make sure that you're not exceeding what you need to spend or what you want to spend just to earn more points."
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Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.