Credit Card Makeover: Ditch the Debit Card, Deborah

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Deborah is a friend of mine here in Denver. The last time my wife and I went out with her and her husband, I couldn’t help but notice that they used their debit card to pay for dinner. While debit cards can be a great way to control spending and stay out of debt, they don’t offer the same benefits and security that credit cards do.

Where Deborah is…

I asked Deborah about the cards she and her husband use. She replied:

“I have an American Express Blue and Visa debit card attached to our checking account. I mainly use the debit card. Honestly, nothing about either card jumps out as beneficial – although I think the AmEx extends some warranties. We almost always pay our balance off, and we’d like to earn points or miles.

Our credit is excellent, but here’s something odd: When we were looking to get a construction loan for a home renovation project, both my husband’s and my credit scores were taken into account. While my score was fine, the mortgage broker explained that if I’d had a more complete credit history, it could have been even better!”

What they need to do…

First, Deborah and her husband need to realize their excellent credit is a valuable asset – but one that needs periodic management.

Although Deborah pays her bills on time, there are other factors that influence her credit score. According to credit score creator Fair Isaac, having a diverse portfolio of credit is also important, and so is a long history. She might improve her score over time by adding a credit card or two, as long as she uses them responsibly. Additional cards could also potentially reduce her debt-to-available-credit ratio – known as a utilization ratio – which is another component of credit scores. (For more on utilization ratios and other components of a credit score, see 5 Ways to Keep Your Credit Score Up That Make No Sense.)

So which cards should Deborah get?

Her American Express Blue card earns Membership Rewards points, offers extended warranty coverage, and has no annual fee. She should hang onto it, since it costs her nothing and will help maintain her length of credit, another important factor in her credit score.

To add to her portfolio, she should jump on the amazing new British Airways promotion for 100,000 of their Avios points (which is what they’re calling their miles). This is an incredible sign-up bonus that, once earned, can be used on partners such as American Airlines, Cathay Pacific, and Qantas.

A lot of couples – such as my wife and I – took advantage of this offer in the past and earned more than 200,000 miles. Another great option is the Starwood Preferred Guest Card from American Express, which offers both hotel awards and transfers to airline miles. Finally, the American Express Blue Cash Preferred is another favorite of mine due to their phenomenal 6 percent rate of return at grocery stores.

By adding a few more credit cards to her wallet, Deborah can earn greater rewards while improving her credit.

Disclaimer: This content is not provided or commissioned by American Express. Opinions expressed here are author’s, not those of American Express, and have not been reviewed, approved, or otherwise endorsed by American Express. This site may be compensated through American Express Affiliate Program.