When you mention credit cards to most people they talk about them as if they were some kind of sin. This is because so many credit card companies have charged consumers an ungodly amount of interest for their credit. However, if used correctly, consumers can not only save time and energy by using credit cards, but also make money and get a whole bunch of free stuff. The following is a list of seven principles that will help you to use rewards and cash back credit cards to make money and get free stuff. In addition to this, check out our upcoming articles Top 5 rewards cards w/ no annual fee and Top 5 cash back cards w/ no annual fee
1. Be disciplined… Never pay interest – how on earth are you ever going to make money on credit cards if you are stuck paying their ridiculous interest rates. Most charge between 13% and 19% per month and this is for people who have not missed payments… how is this legal? Many people get sucked in through 0% interest for a certain period of time, but then the build such a large debt load that they cannot pay it off before the introductory period ends and find themselves paying out the wazoo. The name of this game is to stay disciplined. PAY OFF YOUR CARD EVERY MONTH and don’t get charged interest. This is the first and foremost principle in using credit cards to your advantage.
2. Never pay annual fees – why pay annual fees when many of the best cards out there don’t charge them? Typically if a credit card company is charging an annual fee it is saying, “suckers, please apply.” There are too many great credit cards out there that have no annual fee and pay great rewards. Check out our articles Top 5 rewards cards w/ no annual fee and Top 5 cash back cards w/ no annual fee.
3. Don’t get fooled by miles cards – many of the miles cards are really a suckers bet and here is why: you don’t get a payoff until after you have like 40000 miles. At 1 mile per dollar you do the math – even at 5 miles per dollar. Most of the good points cards can also be used to get airline miles, but you are not stuck with only getting miles. To make matter worse, miles expire – points don’t and neither does cash back.
4. Think percentage, not miles, points, or cash – this is where even smart people go astray, they focus on how many points, or miles, or cash back that they get rather they looking at the percentage that they are getting back in relation to how much they spend. Who cares if you are getting cash in your pocket, or gift certificates to places that you shop at anyway, the main focus should be how much you are getting back by spending on that credit card. As I have already mentioned miles cards are generally for suckers and this is one of the main reasons, they don’t pay nearly as much as cash back and points cards. See the aforementioned links to related articles. You should aim for around 5% back in the first 12 months and 1-2% after that assuming that you have good credit. If not, check out Top 10 ways to build your credit resume.
5. Spend spend spend – the only way you get rewards is to spend money on the card. Once again, refer to step 1 and DO NOT EVER PAY INTEREST by maintaining a balance, but spend lots on the cards. Get creative, many times I have gone on trips with friends and for “convenience” sake I pay for everything and then they just pay the total after we return. Travel with a group overseas once or twice and you will find a veritable fortune in cash back or gift cards when you return. The point is, if you are going to spend it anyway, why not put it on your card and then pay it off at the end of the month? It doesn’t matter if it is a stick of gum, use your card. This will also help with step 6.
6. Get organized – one of the great ancillary benefits of using your credit card for all your purchases, is that it will enable you to easily organize your finances. It is like having a personal secretary that itemizes your expenditures every month. It is worth using credit cards for all your purchases just for this. Use this to track your spending and better organize your budget. In the game of personal finance, no one saves or makes a dime without being organized. Also, check out Best free tools to organize your personal finances.
7. Return to step 1 – you must be diligently disciplined to use credit cards to your advantage. If you don’t keep this rule in mind it will come back to bite you. The game for the credit card companies is to get you to forget, or not care that you are maintaining a balance. PAY YOUR BALANCE OFF EVERY MONTH. In remaining diligently disciplined you will also build your credit making it easier to get approved for great rewards cards.
