Of Credit Cards and Cash Back

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.

Credit Card
flickr – frankieleon

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).

YNAB accounts
The Magic of YNAB

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.

flickr Jeremy Yerse

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.

(contrary to popular belief, keeping a balance on your cards isn’t beneficial to your credit score)

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.

do this if using credit makes you spend more.

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?

25 thoughts on “Of Credit Cards and Cash Back

  1. I am a HUGE credit card advocate, especially for all the reasons above – but yes, definitely need to learn how to use it responsibly. I always act like my credit card in lieu of my debit card. Whatever is in my checking account is the only amount that I can ever charge to my credit card at that given point in time (even then, I never max with a charge that would deplete all my funds in my checking account)! I think that is so amazing that you automatically take the cash back to enhance Addie’s college fund. What a great habit to start! I currently only have a Chase Freedom and Chase Sapphire card, and I’m looking to apply for a third here shortly. The best part of the Freedom and the Sapphire is you can transfer to combine points!

    Liked by 2 people

    1. That’s a great approach Alyssa! I think people get into trouble with cards because they figure they’ll be able to pay the cards off in the future, but something inevitably comes up and then they’re in credit card debt. If paying off cards in full are too confusing for some people – I wouldn’t recommend using credit at all!

      I just recently got the Sapphire card but am looking forward to using it for travel. I’m already budgeting a little more for Addie’s college to compensate for the lack of cash back rewards. Transferring points between both Chase cards seems like a great perk! Turning the 5% gas this quarter into points for travel! Awesome!

      Liked by 1 person

  2. I charge everything I can on my credit cards (and have yet to pay for interest :P). And I too favour cash back rewards cards – for the simplicity of it and easy to understand.

    I loathe having cash because it’s so easy to lose track of $5 here, another $20 there… I like seeing exactly where my money goes. Plus there’s very little reason for me to carry cash when my cash in my current accounts right now are earning interest (although only 0.25-3% it’s still something).

    Haha you seem to have a pretty sophisticated system there Vic XD I’ve only got 2-3 credit cards I use lol!

    Liked by 1 person

  3. I took about a 5-year break from credit cards to get a hold of my finances, but now I’m back on the CC wagon. The Sapphire is awesome (though they are darn-near impossible to destroy). And I’ve found, like you, that with YNAB credit cards are incredibly easy to manage. I’m always only spending money that I actually have so by the time the bill rolls around the money is there to pay it off in full.

    Liked by 1 person

    1. I just got the Sapphire – so far so good! Can’t wait til I get my 50,000 bonus so I can put it towards a Hawaii trip!

      Yep! YNAB is great for credit cards! It made me stop thinking of credit cards as delayed payments. It used to always trip me up paying a bill a month after spending. Now YNAB keeps track of the spending with the money in my checking. Awesome!

      Liked by 1 person

  4. I think the way you manage your credit cards makes complete sense. Why wouldn’t you take advantage of all those opportunities, especially if you actually do it! Most people claim they’re choosing a card for the potential points and then end up using it for all of the wrong reasons. Most people also take 7 cards on for all of the wrong reasons.

    Interesting take on your credit score, but I actually don’t mind what you said. I think if you already have all of your ducks in a row and you are making smart financial decisions regardless, you’re clearly doing something right. Happy Friday!

    Liked by 1 person

    1. Yep! I know people that take advantage of rewards but have a balance. Makes no sense!

      I’m not saying a credit score is a horrible thing, it’s just something I haven’t focused on since I don’t plan on getting a loan anytime soon. Fortunately I have a really great score!

      One hack (if you could call it that) is that every now and then I’ll increase my credit limit on my cards. Makes my utilization super low as my line of credit on my cards is a lot now!

      Liked by 1 person

  5. Credit cards aren’t bad – it’s irresponsible people with credit cards that are bad. Trust me, I know, we were those people. Now that we’ve changed our attitudes about spending money, we too can use credit cards as a tool in our financial journey. We only use one credit card on our monthly expenses (it has a cash-back program) and it is paid off in full each month. Then, we put as much as possible on our other balances to pay them down. We hope to have all of the credit cards paid off by the end of the year.

    Liked by 2 people

  6. Omg, I love credit card rewards! I manage money for a living and of course I struggled with my own money because that’s how life is sometimes 😁 however, I am obsessed with credit limits and incomes and I just blogged about it. The limits they give and at the income some have are excessive! What is their reasons for doing that? I love your idea of saving for college with the rewards…I think I’d like to save the rewards for retirement for me personally.

    Liked by 1 person

    1. Using the rewards to save for retirement is a great idea! For me it’s not that much cash back, so I love the idea of putting it to a better use rather that take $20 and go to a crappy dinner 🙂

      I actually think I have a pretty big limit because I call every few months to increase my credit limit. Helps me have a super low credit utilization :). I’m not sure what my limits are because I don’t spend that much on the cards.


  7. I’ve used credit cards to travel hack my way to Spain last year. And this year I’m going to Italy doing the same! I didn’t get my first credit card until I was 28, because I was so debt-averse, but used responsibly, they can be good!

    Liked by 1 person

    1. That’s awesome Melanie! My wife and I didn’t travel much so I didn’t feel that travel hacking was for us. Now that we have a kid we regret not travelling enough! I hope to start travel hacking this year!


  8. Whoa, Vic! You’re a card pro! I have two cards and that’s enough to stress me out with the different payment due dates. But I for sure get tons of points on those two with all the work travel I do — a Chase United card that’s no longer available and the Chase Marriott Preferred. (But I travel with United and stay with Marriott, so these are worth it. Not sure if they would be a good deal otherwise!)

    Liked by 1 person

    1. One thing that helped me was that I called and changed all my statement end dates to end around the 25th. So whenever I do my monthly budget at the end of the month I pay everything off!

      Sounds like you have two great cards! If my Chase Sapphire card works out for me, I’ll have to look into those two!

      Liked by 1 person

  9. Sounds like you and your wife have really mastered the use and benefits of credit cards. I wish they wouldn’t lend to people like me a few years ago when they know I can’t afford repayments… Mind you, its been my responsibility since to read posts and books and educate myself about better personal finance too!

    Liked by 1 person

    1. I completely agree! At first my wife was annoyed, but after she realized that me doing that would help us earn rewards better she was more than happy to oblige!

      I also only have my wife keep 2 or 3 credit cards at a time so I don’t confuse her TOO much. 🙂


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