Credit Card Rules to Live By (2024)

FAQs

What is the 2 3 4 rule for credit cards? ›

The 2/3/4 rule: According to this rule, applicants are limited to two new cards in a 30-day period, three new cards in a 12-month period and four new cards in a 24-month period. The six-month or one-year rule: Some issuers may only let borrowers open a new credit card account once every six months or once a year.

Bank of America 's 3/12 or 7/12 rule

If you do NOT have a deposit account with Bank of America , your credit card application will be denied if you have opened three new cards in the past 12 months, based on what's visible on your credit report.

The 15/3 rule, a trending credit card repayment method, suggests paying your credit card bill in two payments—both 15 days and 3 days before your payment due date.

What is the 5/24 rule? Many card issuers have criteria for who can qualify for new accounts, but Chase is perhaps the most strict. Chase's 5/24 rule means that you can't be approved for most Chase cards if you've opened five or more personal credit cards (from any card issuer) within the past 24 months.

Budgeting with the 50-30-20 rule

All you need to do to make a monthly budget with the 50-30-20 rule is split your take-home pay (that is, after taxes and deductions) into three categories: 50% goes towards necessary expenses. 30% goes towards things you want. 20% goes towards savings or paying off debt.

Pay Off Your Balance

The golden rule of credit card usage is to do everything you can to pay off your entire balance each month.

To maintain a healthy credit score, it's important to keep your credit utilization rate (CUR) low. The general rule of thumb has been that you don't want your CUR to exceed 30%, but increasingly financial experts are recommending that you don't want to go above 10% if you really want an excellent credit score.

Use credit wisely - follow the 20/10 rule

Never borrow more than 20% of your annual after-tax income. Keep your monthly debt payments to less than 10% of your monthly after-tax income. Keep track of your purchases and don't buy expensive and unnecessary impulse items.

This means you should take care not to spend more than 30% of your available credit at any given time. For instance, let's say you had a $5,000 monthly credit limit on your credit card. According to the 30% rule, you'd want to be sure you didn't spend more than $1,500 per month, or 30%.

However, one of the most important benefits of this rule is that you can keep more of your income and save. The 20/10 rule follows the logic that no more than 20% of your annual net income should be spent on consumer debt and no more than 10% of your monthly net income should be used to pay debt repayments.

What is the number 1 rule of using credit cards? ›

Pay your balance every month

Paying the balance in full has great benefits. If you wait to pay the balance or only make the minimum payment it accrues interest. If you let this continue it can potentially get out of hand and lead to debt. Missing a payment can not only accrue interest but hurt your credit score.

When you have a credit card, most people usually make one payment each month, when their statement is due. With the 15/3 credit card rule, you instead make two payments. The first payment comes 15 days before the statement's due date, and you make the second payment three days before your credit card due date.

In most cases, however, it's best to keep unused credit cards open so you benefit from longer credit history and lower credit utilization (as a result of more available credit). You can use the card for occasional small purchases or recurring payments to keep it active as opposed to using it regularly.

Your credit card company cannot increase your rate for the first 12 months after you open an account. There are some exceptions: If your card has a variable interest rate tied to an index; your rate can go up whenever the index goes up.

It says your total debt shouldn't equal more than 20% of your annual income, and that your monthly debt payments shouldn't be more than 10% of your monthly income. While the 20/10 rule can be a useful way to make conscious decisions about borrowing, it's not necessarily a useful approach to debt for everyone.

That said, making two payments per month actually can help your score—but for a different reason. This strategy makes your credit utilization ratio appear lower, which can boost your credit score in the long run.

You're not limited to a single monthly payment. Smaller, more frequent payments can reduce your interest charges and provide other benefits.

Unless you've reached a prior agreement with the credit card company, partial payments will not satisfy your account's minimum payment requirements. Even if you pay a little money, your account will become delinquent, and the credit card company will report the late payments to the credit bureaus.