Get a Day-to-Day Credit Card and Make Money!
By Mike
Since I recently bought this blog, I keep going back in time through the GLBL history and read its previous articles. Larry has a great grasp on his personal finances yet we have a different perception of the very same topic. One article caught my attention: No Credit Cards; Here’s why. In this post, Larry was explaining why he wasn’t even carrying a credit card anymore. These pieces of plastic often have the strongest voice suggesting:
“You can buy it now, it’s on sale and you will save money!”
“Buy it now and you will have another 30 days to pay it back”
I can’t really argue his point as we have all encountered a moment in our lives where we really wanted something and couldn’t afford it. This is how credit cards can burn a hole your wallet and allow you to spend in a heartbeat. You sign the credit card receipt before you even realize that the item you wanted is now yours hahaha”¦ while the evil debt is growing out of control!
However, I am a big believer of using systems to your advantage. Instead of playing the banks’ games and pay ridiculously high interest rates on their credit cards, I have decided to keep banks’ board game but set the rules differently.
I am looking for a reward credit card with the highest payback and use it everyday!
I actually use my credit card for all daily expenses that would normally be paid with cash or my debit card. No extra, no “rewarding myself because I deserve it”, only normal daily expenses such as gas, groceries, phone and internet bills.
If you have trouble with your credit cards’ powerful mind control abilities, here are 2 quick tricks:
If you want to take advantage of the banks instead of working for them, try these 2 things to make sure you don’t pay a dime in interest nor increase your level of spending due to your credit cards:
– Set an automatic payment through your credit card
There are tons of bills you can set with automatic payments. Since you have to pay for your phone, cable and internet anyways, do it through your credit card in order to earn points or cash rewards.
– Take your credit card out only for specific purchases
There are 2 absolutes in your spending: you need to eat and pay for transportation. So why not leave your credit card in the drawer and take it with you only when you go to the pumps for gas or the grocery store, buy your bus pass/tickets at the same time!).
Combining a few utility bills, grocery and transportation costs, you will most likely spend about $1,250 per month. This is $15,000 worth of points on your credit cards in one year with stuff that you had to buy anyways. This is a free rebate thanks to your credit card!
I personally use my credit card for any purchase (from my $1 coffee to my cash deposit on a new car). I ensure that I pay my bills in full every month. If you are not yet comfortable enough managing your credit cards, you can use my 2 tricks and avoid making unnecessary purchases.
With this technique, you will learn to tame the beast and avoid getting burned by high interest rates on your credit cards. The best thing is to select a card with rewards that you will use. Some give gas cash back, others have points that enable you to buy anything in a catalogue or airplane tickets. I have listed a few great credit cards with rewards:
Credit cards with reward points and (NO ANNUAL FEE!) that I like best:
| Cash Reward:
Discover® More(SM) Card – Wildlife Collection
|
Main Features:
Through the reward program, cardholders can earn a 5% Cashback Bonus® in categories such as travel, gas, restaurants, movies, and more. Cardholders also earn up to 1% for general purchases and .25% for purchases made at select warehouse clubs and discount stores. |
| Travel Reward:
Miles by Discover® Card
|
Main Features:
Through the rewards program, cardholders earn double miles on up to $3,000 in travel and restaurant purchases and one mile for every dollar spent on general purchases. Earned miles can be redeemed for airfare or reduced airfare on most major U.S.-based airlines with no blackout dates. Miles can also be redeemed for gift cards from 50 brand-name partners or cash. |
| Cash Reward:
Discover® More(SM) Card – Monogram
|
Main Features:
The reward program allows cardholders to earn a 5% Cashback Bonus® in categories such as travel, gas, restaurants, movies, and more. In addition, cardholders can automatically earn up to a 1% Cashback Bonus® on all other purchases. |
| Cash Reward:
IberiaBank Visa® Gold Cash Back Rewards Card
|
Main Features:
|
In order to get other cash reward credit cards click here.
Author: Mike
image source: Andres Rueda
September 8th, 2009 at 11:26 am
I understand your position. However, when you use a credit card the merchant has to pay (Visa, Mastercard, etc) about 2% of the amount charged. This cost is going to be passed on to the consumer. Remember when gas stations use to have 2 different prices depending on if you paid with cash or credit? Now the gas stations charge everyone the credit card rate. Credit cards are convenient but that cash back stuff is not free. We are all paying for it with slightly higher prices. Credit cards are here to stay but we pay for the convenience and the Visa/Mastercard companies are benefiting.
September 8th, 2009 at 12:04 pm
Billy, you are correct, but I need to point out (this is not my article) that if you pay cash, you are still paying the cc fees. I don’t like it any more than you do, but if a person can control their credit card, you can get at least a small portion of these fees returned to you.
September 8th, 2009 at 12:09 pm
Billy,
I agree with Stew, unfortunately, everybody is paying the same price. Credit card fees have been included in any merchant business model as most people will either use their bank card or credit card to pay. I rarely have more than $20 on me since I always pay with my credit card.
I rather make a few bucks here and there (you’re not getting rich with the cash back from your credit cards) since I will have to “finance” the credit card fee charged to the merchant anyway ;-)
September 8th, 2009 at 3:08 pm
This method can work, but it can also be easily abused.
I don’t like the idea of putting groceries on the card. Yes, they are a necessity, but it’s easier to overspend.
Go to the grocery with a cash budget and you’ll spend a lot less than you would with plastic.
As for the gasoline and phone bill, and things like that, go for it if that’s what works for you.
September 8th, 2009 at 3:20 pm
Kacie, I agree. We do not put groceries on a cc – hmmm . . . post idea.
September 8th, 2009 at 3:21 pm
I did this last year … put big purchases on the card, paid it off w/in 10 days and cashed in the reward points. Once the cc issuer cancels their rewards program, would it still be a good thing?
September 8th, 2009 at 3:22 pm
Stew,
It would actually be interesting to have both point of view on the same blog ;-) This would probably help readers to decide whether they should use their credit card for grocery or not ;-D Can’t wait to read your post!
September 8th, 2009 at 3:25 pm
Gina,
the CC issuer will never cancel their reward program. In fact, even though they make a lot more money if you leave a balance on your card, they make most of their revenue from the transaction fee imposed to the merchant (around 2% fee on each transaction).
While they generally give 1% of your bill, they still make 1% in their pockets ;-)
September 8th, 2009 at 7:25 pm
I like using my credit card that gives me 2% on all of my purchases. I use it for all of my utilities and to pay my auto and homeowners insurance in full.
So far, I’ve already earned over $100 in free money for making purchases I had already planned to make.
September 8th, 2009 at 8:38 pm
Great idea. I really think that like all things related to personal finance, it is always related to discipline. There is no doubt that you can get more for your money through credit cards, but if you feel like you will not be able to buy what you would have bought without credit, then you have your answer.
September 8th, 2009 at 10:28 pm
Well, that explains a lot. I had lost touch with this blog and noticed something was different….
Thanks for filling me in, and thanks for the terrible advice. Seriously, it’s not a game, and you’re not winning. Despite that super-fantastic 1% they gave you back, you just spent – on average – 8-12% more since you used plastic.
Not to mention the fact that you went out and bought that whosits brand new, at retail. You just paid the absolute most you could have possibly paid for that item, including the additional overhead for the credit card fees. You didn’t buy it used (not so many garage sales taking plastic), and you didn’t (heaven forbid) go without.
Now before we get the long string of ‘but this’ and ‘but that’ interspersed with the word ‘responsible’, let us also address the core issue here – behavior. As if the math even worked, the real problem is the money mis-behavior that this encourages. Rewards – for spending money. Because these folks are just so introverted that they flat out are unable to spend money and need a little encouragement. Give me a break.
If you are chasing rewards, then you are playing a losing game. You are not looking for the best price, you are not delaying or forgoing a purchase. A far better goal is the money saved by NOT shopping. The returns are much better too.
September 9th, 2009 at 5:34 am
Mr. Not The Jet Set,
Terrible advice? Tell me, who controls your body; your brain or your Mastercard?
You are telling me that I encourage people buying new instead of used. Now if you know where I can buy used internet services, used gasoline and used food, let me know! I am suggesting to put things that you have to buy anyway on your credit card, not extra stuff!
Are you really going to put more gas in your car because of the way you pay it? talk more on the phone? I don’t think so.
Actually, you don’t even need to be responsible. Here’s how you can do it:
#1 set up a savings account
#2 set up an automatic transfer from your regular bank account to your savings account in the amount of grocery/gas/utility bills
#3 use your card to pay those expenses ACCORDING TO YOUR REGULAR BUDGET
#4 pay the credit card every month in full.
I have been doing that for the past 6 years and I paid 0$ in interest charges. However, I was able to get;
– $1000 worth of paint for my house (can you buy used paint?)
– Going to the zoo with my kids for free every summer (can you buy used visit to the zoo?)
– Going to the movie (including popcorn) for free several times, etc.
I even get my toaster and my phone free from my rewards points! (ok, those you can buy used!).
Telling this is a terrible advice is like telling people they should not drive their car: after all, your speedometer shows you can drive up to more than 120 mph… do you HAVE to do it? It is the very same thing with your credit card. Both your car and your card can be tools of massive destruction. However, if they are used carefully, they can do a lot for you!
September 9th, 2009 at 6:59 am
Mike, great point about not being able to buy a lot of services or products used. I agree – most purchase amount are independent of the purchase method.
By the way – if you go to a movie and scrounge around under the seats you can probably get some “used” popcorn. :)
September 11th, 2009 at 9:48 am
What’s this “Since I bought this blog…” comment?
Did I miss something?
September 14th, 2009 at 6:03 pm
For me it is a shame that you are shifting the blog’s stance on credit card.
I agreed with Larry that not leveraging your monthly money cash flow is the best way to gather little by little.
It feels to me that most folks of our generation has been bought by the marketing gimicks of the lender.
September 14th, 2009 at 9:45 pm
Hey Gholmes,
There is a difference between telling people to waste money through credit cards and to save money with a transaction tool.
You have 2 options: either you pay your gas, phone, cable and internet cash and to don’t make a penny out of it or you take your rewards credit card and earn a few hundred bucks every year from this strategy.
This is also part of gathering little by little.
Cheers,
Mike.
September 15th, 2009 at 12:10 am
@Spencer – You too?
@Gholmes – I hear ya. I was this | | close to writing a blog post about this site dying little by little, but it was too much of a downer.
@Mike – I’ve read this theory time and time again. Unfortunately, credit cards are not tools – shopping is not a mechanical action – people are not machines.
One minute, this little scheme is used for all daily purchases (none of which are unplanned, outside the budget, or impulsive – never, ever). Then suddenly it’s just food, gas, and internet. Near the end, we’re back to buying coffee and a car with the card. Plastic is a drug, that will suck you in. As you see here. First it’s just the necessities “you’d buy anyways”, then suddenly you’re making a down payment on a car with it (you can buy those used, BTW)
But don’t worry, we’ve got 27 easy steps to credit card success! – Ok, maybe it wasn’t twenty seven. 2 absolute rules + 4 steps + 4 credit card ads as big as the post. I guess it’s 4 steps for cash too:
step 1 – pay for purchase with cash
step 2 – go home and play with the kids
step 3 – spend some time with the Mrs.
step 4 – Never worry about the purchase again because it’s over and done with
But then you got all this stuff with your points! Sweet, sweet points. Consumer Reports shows most of those never get redeemed before expiring. But that’s ok, we’re talking about $1000 in paint (you can buy that ‘used’, BTW – Habitat Re-store), I’ll generously guess $100 in zoo tickets plus another $100 for the movies (he did include the popcorn!), and another $100 for the toaster and phone (I’m sure they are quite nice). So $1300 in a year for spending how much on that card??? You could have bought that car used and saved that amount with your eyes closed. It’s a lot of wasted effort, with your eyes on the wrong prize.
I know, I know you never buy extra stuff. As if. Again, once the focus is on credit card rewards, you’re playing a losing game. And that’s not to say that you’ll incur interest by doing it. The Mrs. held a rewards card for 8 years – through the years when very few get by without debt, college. And she never carried a balance, never paid interest. Yet we shredded it just the same. Overspending =/= debt. But the encouragement to spend and spend often results in all those $1 coffees and indiscretions at the grocery store. Don’t tell me you’re not spending more by using plastic, new-car-breath.
Oh, yeah, then just pay the card off at the end of the month. This line used to be such an easy sell in the blogosphere. But then 2007 hit and the economy tanked. Tell this to the folks whose jobs were cut unexpectedly. It was probably an easy sell before then, but then 2001 and the dot com bubble burst. Tell this to all those young techies who showed up to work to find the doors locked for good. The core issue here is this: shortsightedness. Not only the assumption of having the money come next month, but also the intricate machine required to make all this work. It just takes one piece to break, one gear to fail, one slip – maybe out of your control – to bring the whole system down. It assumes the best case scenario every time. That’s not to say it can’t work, but ask some of those folks that took 10% pay cuts about paying all the bills the next month….
I could probably keep going. But I shouldn’t.
September 15th, 2009 at 5:38 am
Mr. Not The Jet Set;
We could extend this credit card theory on both side for a long time.
I am not saying that I never buy useless or unnecessary stuff. I actually do waste money. As most people do. However, I never overspend. So regardless of which method I use (cash, bank card or credit card), I will still end-up with no pending debts at the end of the month. This is why I use my credit card for every single purchase. Hence, I have figured I would be better off making a few extra bucks while spending this money anyway. If I ever lose my job tomorrow, I would have a 1K-2K balance on my credit cards and 1-2K in my bank account sitting there to pay it. So I would not have a dollar owed on my card at the end of the month.
Then again, if you can’t spend according to your budget, don’t apply for a credit card. But that won’t solve your initial problem; sticking to your budget. There are million other ways to overspend without a credit card (getting a big mortgage for example).
Even though I have not the same way of thinking as Larry, I think you should give me a chance and read a few more posts. I shouldn’t be too bad as it was your first reaction in 2 months of posting ;-)
Take care,
Mike.
October 5th, 2009 at 12:45 am
Credit cards can be helpful when only used correctly. Sometimes it can be safer for your finances if you buy discount visa gift cards that can be used the same way as debit cards
October 10th, 2009 at 4:38 pm
Should a person aiming for financial freedom look towards owning a Credit Card whether it has rewards yes or no. I think not. Credit Cards are the monster that is holding us back towards that goal. It is better for one to have a budget and stick to it. Purchasing all in cash and only purchase things that are necessary. Credit Cards are debt and debts should be eliminated from one lives.
May 27th, 2012 at 2:17 am
I have been using my credit card for all grocery, transportation and bill payments for some time now and I have to say it has worked well for me. However you should emphasise more that discipline is the key. Its imperative to pay back the full balance every month.
August 1st, 2012 at 12:52 am
Credit unions and other cooperatives can be of great help these days and found the services or benefits it offers meet my needs.I have really enjoyed reading your posts about Credit cards. Thanks for all you do and share.
Thanks.