First and foremost, this article is only for those who are financial responsible. Credit cards shouldn’t be part of a financial strategy conversation unless it’s proven that bills can be paid without paying overdraft fees. That being said, credit cards can be a powerful tool if you know about them and know how to use them properly.
Originally, I was in the camp of taking a scissor out and cutting up my credit cards and of those around me who were willing to do so. Since digging a little deeper into the subject, I’ve found that there is many benefits to using them in an effective manner. Piling up travel miles and reward points are extremely valuable. Who wouldn’t like a free ride to a weekend getaway or what have you?
Advice From The Top
Even after all these years following personal finance trends, reading books, and trial and error, it took a passing comment by a mentor to get me to focus on the aforementioned benefits. At a business lunch, he was boasting about his free trip to Mexico. This, of course, perked my ears up as I conjured up a sense of curiosity.
When I asked him to elaborate, he mentioned that he put every penny of his monthly expenses on a credit card in order to stockpile credit card points. This had gone against everything I had ever learned! How could he be so reckless!
It took a step back for me to realize, wait…am I wrong? He’s rich and successful, he must be doing something right.
That’s when I came to the conclusion that it’s perfectly okay to use credit cards if you are disciplined enough to pay them off every month. In essence, as long as you aren’t paying interest on your principle, it’d be a smart move to get your cash back or travel miles that you deserve. In many way, I felt foolish for not coming to this conclusion myself but hey, live and learn. This casual conversation brought upon some research as to what which cards are best for me and my clientele.
Travel
Bank of America Travel Rewards Credit Card: I’ll be honest, in researching the best travel cards, I found my self applying for this one personally. I guess that’s a good sign! See rewards below:
- 1.5 points for every $1 spent on purchases
- 20,000 online bonus points after you make at least $1,000 in purchases in the first 90 days – which can be redeemed for a $200 statement credit toward travel purchases
- No annual fee
- Introductory rate of 0% for first 12 billing cycles
- 20,000 bonus points if you spend $1,000 in the first 90 days
If there were a Tinder of credit cards, I’d be swiping right!
Cash Back
American Express Blue Card Preferred: If you’re a big online shopper, the current deal offered for this card will entice you. Ten percent of your Amazon purchases up to $200 is what they are advertising. On top of that see the additional perks they are offering:
- 3% Cash back at U.S supermarkets up to $6,000 (then 1%)
- 2% back at U.S gas stations and department stores’
- 1% other purchases (subject to terms and limitations)
Final Thoughts
Honestly, as long as you are paying your bills every month, there is no wrong answer here. At the end of the day, it all comes down to personal preference. Only now, you will not be able to plead ignorance to leaving money on the table when it comes to making the most out of your credit cards.
Despite the stigma against credit cards, these type of incentives reward those who are financially responsible and disciplined. It is no surprise why these type of folks continue to get ahead.
Lastly, there are a couple additional reasons to employ the strategy of dumping all of your monthly expenses onto your credit card or cards.
Whether you are a small business owner who is financing their business with credit cards or just a personal finance geek, record keeping is extremely important. Business owners can simply print out their yearly summaries and give them to their accountant. At that point, they can focus on other parts of their business like payment solutions or invoicing efficiencies. It relieves the stress of having to crunch the numbers as much as they normally do.
Personal Finance benefits
As far as personal finance benefits, it will be an asset to know exactly what percentage you are spending on certain types of expenses. It’ll give you the “big picture” of your money.
The only thing that will throw a wrinkle into this is if you make a lot of ATM withdrawals, as cash is hard to track.
Paying yourself first is the conventional wisdom of all personal finance junkies. Many people transfer their money right off the top of their paycheck and move it to savings, which is good practice. Just make sure to give yourself some room, as you don’t want to pay unnecessary overdraft fees. An article from CNN Money shows ATM and overdraft fees are topping $6 billion dollars of late.
Don’t become a statistic!
