I LOVE me some credit cards.
Unless I’m at a place where they only accept cash or there’s a BS credit card fee, I’ll opt to use a credit card for every single purchase. I once had a credit card transaction as low as $0.33.
In the past few years , my wife and I have used over 10 different credit cards. I thought that was a lot until I read this post by J$ about the guy who has 1,497 cards! Now, that doesn’t even make any sense.
Here are three ways that using credit cards are awesomesauce:
1. Easier on My Budgeting Mind
If you don’t read this blog regularly (SHAME!), you should know by now that I’m a huge budget nerd. If you put as many purchases as possible on your card, it makes it pretty easy to track your spending using a budgeting tool like Mint or the New YNAB. All your transactions are automatically populated and you just have to make sure the categories are right. It’s a lot easier to lose track of what you spend on when you use cash. (btw – don’t use debit cards for purchases ever. You’re welcome).
2. Rewards, Baby, Rewards
The cards I currently use:
Citi Double Cash – 2% cash back
Discover IT – 5% cash back on rotating categories ($50 signup bonus)
Chase Freedom – 5% cash back on rotating categories ($150 signup bonus)
Amex Blue Cash Preferred – 6% groceries, 3% gas ($200 signup bonus)
Target Redcard – 5% off Target
Sears – just because it’s my wife’s oldest card ¯\_(ツ)_/¯
Chase Sapphire – for travel reward points (up to $625 signup bonus)
I rotate between these cards depending on what I’m purchasing. I know that you probably think I’m a bit crazy to keep track of all these cards just to score 1 – 5% on my purchases. Since I’m a financial weirdo – it isn’t too bad. Although I do put labels on the cards for my wife so she knows what card to use. 😉
Between all my cards last year, I made $736.75 in cash back. I also made $250 in signup bonuses. Not too shabby.
So far I’ve stuck with mainly cash back cards, but I’ve recently been intrigued by the idea of Travel Hacking, where you sign up for a bunch of credit cards to take advantage of the signup bonuses. Fellow blogger Jim at Wallet Hacks has a post in which his friend Michael writes about saving $37,100 on his honeymoon. That’s pretty damn insane! I don’t think I’ll get as crazy as Michael, but if I can do what he did on a smaller scale I see cheap travel in our future. 🙂
3. Saving for My Daughter’s College
We’ve made it a point to make the cash rewards go towards Addie’s future. Every single penny that we get as cash back rewards immediately gets deposited into Addie’s 529 Plan. This is an extra $50 – $75 a month in her college fund in addition to our monthly contribution ($50 currently, $200 when I was working).
What About My Credit Score?
When I tell people that I’m a credit card hoarder people always tell me that it will hurt my credit score. Last I checked, my FICO score was over 800 (anything above 720 is considered excellent). While opening multiple cards may bring down your credit score, it’s only temporary and a small part of what makes up your score. More important factors in determining your score is credit history, credit utilization, and credit length.
I actually don’t care about my credit score that much. The number doesn’t reflect how wealthy you are. It only tells potential lenders how good you are in borrowing money. We don’t plan on buying a house anytime soon and we don’t intend to get a car loan ever again. While having good credit is good for things like getting better rates on insurance and signing up for utilities, it’s not something we’ve really focused on.
Using Credit Responsibly
I wouldn’t recommend using credit cards for everyone. You should only use credit if you can PAY IN FULL each month (I haven’t paid interest since college). If you’re currently in credit card debt or ever carry a balance on your card, you shouldn’t be using credit cards for the rewards. Any interest you would pay would completely negate any cash back or airline miles. If using a card encourages you to spend more, you should stick to cash.
If used responsibly, credit cards can be a great tool to get cash back and other rewards. It’s a lot easier for me to budget and I’ve turned credit card use into college savings for my daughter. You also get some other perks such as price protection, theft protection extended warranties, and free credit scores.
Besides, who wants to deal with loose change and green pieces of paper in your wallet?
Do you believe in the awesomeness of credit cards? If so, what are your favorite cards? Am I just a crazy old man playing with fire?