Even if you don’t want to be “rich,” the idea of having your finances in order is probably appealing to you. Even though we can’t all learn from the wealthy, we can learn from their financial practices to see if any of them work for us.
1,500 cardholders were surveyed by The Ascent. Each respondent reported having a net worth of more than $1 million. We learned the following about how wealthy people use credit cards: While some of these routines are useful to emulate, you might want to steer clear of others.
1. When it comes to applying for credit cards,
the majority of respondents indicated that they hold between two and four different cards. That is comparable to the 2.7-point national average. So far, all is well.
Compared to the rest of us, wealthy cardholders are more likely to open three or more new credit cards each year. They ought to be concerned about their credit scores, but maybe they aren’t. An emergency can occur at any time, even if they do not intend to obtain a new loan anytime soon. It’s possible that you’ll need a personal loan or even a mortgage sooner than you think.
Important point: The likelihood of opening three or more credit cards annually is slightly higher for those whose self-reported net worth is greater than $10 million. They might be less concerned than the rest of us are with maintaining a credit score high enough to qualify for a low-interest loan.
In the United States,
new credit FICO® Scores are still the most popular credit score and the scoring system that lenders use most frequently to determine loan eligibility. Ten percent of our score is made up of “new credit.” In a nutshell, lenders want to know that we don’t just randomly open new accounts, and opening multiple new credit cards each year is likely to raise suspicions.
“Length of Credit History” is another factor that affects our credit scores. This indicates to lenders how long we have managed our credit cards and loans. Our scores rise as the duration increases. They always have several cards that are almost brand-new because they frequently open new cards. Another issue may surface to the point where potential lenders are alarmed.
2. Astonishingly, only one third of people pay their statement balance off each month. It’s like throwing a pile of cash on fire if you don’t pay off your credit card balances every month. When it’s unnecessary to do so, why pay interest on credit card debt?
This is one of those bad habits that we might all like to break.
3. They prefer cash-back credit cards This response was purely personal preference. Some of us prefer cash back on our purchases, while others enjoy watching airline points accumulate.
4. Strangely, 21% of high-net-worth respondents stated that they prefer to pay their credit cards with paper checks rather than electronic ones. We can’t say for sure why, though. It could be related to accounting practices.
5. The fact that more than fifty percent of respondents admitted to maxing out their credit cards is sufficient to remind us that our income is irrelevant. How we manage that money is what matters.
6. They prefer credit cards that don’t charge an annual fee It makes sense that anyone would prefer a credit card that doesn’t charge an annual fee. However, if a card’s annual benefits outweigh the annual fee, it might be worth looking into.
As previously stated, there are some personal finance practices that should be emulated and others that we would all be wise to avoid. It just goes to show that no matter how much money we make, we all have strengths and weaknesses.