Using Credit Cards and Their Rewards Programs They Offer to Your Advantage
In order for credit card companies to draw in large amounts of people, they usually will offer some sort of rewards program when signing up. This can be anything from discounts on products for certain websites, airplane miles or even straight up cash back. While there are many different types of cards with programs that might be beneficial, ultimately choosing a card that is best for you is how you end up using it in the end. Im here to talk about how , if you make a smart decision and use a credit card to pay for items you were already going to purchase, you can end up ahead in the long run.
First you want to find a card with a program that is right for you. I personally use Amazon to purchase many things I need on a day to day basis, so with their card I earn about 5% on many of Amazon’s products, 2% for restaurants, gas stations and drugstores. Also I just straight up get 1% back on everything else that I pay for. This card has no annual fee which is good for me, but it is extremely important I stay on top of payments because at an interest rate of 22% it is basically like borrowing from a loan shark. You can have more than one card, but it complicated things unless you are doing a ton of spending, so until you get a hang of one card, I would say just choose which one works best for you. I would recommend using a site like nerdwallet (https://www.nerdwallet.com/rewards-credit-cards) to compare cards.
The reason that the credit card companies offer these programs is not because they are nice, its because ultimately they are betting you will fall behind on payments and end up in the trap most people do. With interest rates close to 20%, falling behind on payments will very quickly start to compound and no amount of cash back will be worth it. This is the most important part of the article! ALWAYS MAKE SURE YOU HAVE THE MONEY WHEN MAKING A PURCHASE ON YOUR CREDIT CARD. If you want to actually come out ahead and not fall into the trap many have before you, make sure that you can afford everything that you buy. Do not buy something that you are going to have to make payments on. The benefit over using a debit card is the reward dollars and if you pay interest it will negate those gains.
If you do choose to use more than one card, make sure you sign up for certain sites that help you track payments and make the process much easier. Credit card payments might not actually show up on the card for a few days, so you don’t want to forget when the payment is due and ideally you should pay immediately. I recommend mint(https://www.mint.com/), which does a great job not only with credit cards, but with all your monthly bill payments and expenses. In addition they help you setup management goals for your money long term and you can see where you are overspending. It is a very valuable service.
In the end, credit card companies can be beat, but you have to be very diligent and on top of your payments. Make sure that when you are making a purchase, you always have the funds to reimburse it and furthermore, never fall behind and have to deal with their interest. Make sure the card you choose doesn’t have annual fees that will be more than you actually get back and choose a card that you know will be right for you. If you do everything perfectly you might even want to get multiple cards for different situations and if you do make sure you use a management site like mint to stay on top of payment dates. I would recommend against this though, as it can become very complicated very quickly. Im sure many of you have been doing this for years and would love any of the insight you have come up with in that time as well!
Awesome write up! I always pay with card whenever possible to take advantage of their rewards :) I wanted to add too that since I travel a lot, one of the best cards you can use is Chase Sapphire since they offer HUGE signup rewards plus A TON of miles that are transferrable to almost all airline networks. If anyone needs a referral link, feel free to hit me up about one ;)
That said, we get all these rewards as Americans, but what's the best way of going about this for Europeans? I have a lot of European friends that are missing out on a lot of potential benefits, so what I've done is added them as authorized users to my card; although this is getting more difficult nowadays since a SSN is now required. Thoughts?
I actually always thought they asked for an SSN when adding an authorized user. The only thing I can think of either than finding a way to get your European friends SSNs somehow is for you pay directly for them using your credit card then have them pay you back. My main concern with this is that's a rather messy and confusing arrangement to do this.
Yeah thats what I figured and that's what we've been doing so far, just curious if you knew of other ways around it. Anyways, great post again and thanks for the advice!
Btw @calaber24p I mentioned this post of yours in my latest article here!
I hope you don't mind a little bit of exposure ;)
Excellent post, thanks so much for sharing. I love using credit cards to get rewards. Usually to maximize my benefit, I always make sure to pay off my credit cards in full to avoid interest rate charges which can be rather large.
I also use these reward programs to assist in travel hacking. A lot of cards either the airline ones or ones meant specifically for travelers give very large mileage bonuses either initially or after charging a certain amount on the card. If you can charge enough to meet their requirements and open several cards, you can rack enormous travel benefits.
Hi mint is a great tool to manage your financial life, i've been using it since 2 years, thank you for your post
Great write up, man! For anyone interested Discover also has a really good cashback program and they double whatever you earn for your first year. So, if you make $120 in rewards, a year after you've signed up they'll give you another $120! They have select places that you get 5 percent back at which changes every few months, and then it's 1-2 percent back at most other places.
Thanks for sharing this! I really think more people need to find this stuff out!
I'm a tad bit addicted to credit card rewards programs, but since I have yet to pay a dime in interest, I'm ahead around $500 bucks thus far.
It is a slippery slope, but I always pay my balance off as early as possible.
Yeah it is a slippery slope for sure. I have made many thousands in credit card rewards, and free travel over the years, but I have also paid many more thousands in interest to the banks over the same period. As long as you can avoid the mistake of allowing the money to revolve it is great for the consumer, but the banks of course hope you will mess up!
That is awesome man!
Another good strategy (which I just did), is apply for a card with an "interest free" introductory offer that also has a lower APR than a card you already have a balance on. I used this new card (11% APR) to pay off the other (22% APR) and I have 18-months interest-free to manage the same debt. Provides more money for my monthly budget which I'll use for buying silver while it's still cheap!
I get cash back every time.. the catch? PAY the gd damn bills within 30 days!!
Good to know how use bank card.
Just make sure you don't carry over a balance month to month
Great post, thanks for sharing. I love Mint and Nerdwallet and am saving up my Chase points for a vacation pretty soon!