The feeling on credit cards vary widely and if you talk to 5 different people about credit cards, you’re likely to get 5 different answers on whether or not they’re good to use.
Despite being a Dave Ramsey-trained budgeting coach and a self-proclaimed frugal minded fellow, I’ve opened up to the reality that credit cards can be a good tool if they’re used wisely.
In fact, in the past 2 months alone I’ve been able to rack up over $600 in free money from credit card rewards! Personally, we’re going to get CASH back and use the money to buy a new washer and dryer (thanks Chase). How you use the money is up to you, but if you’re able to play the credit card game as effectively as we have, then I’d say that’s a good problem to have to figure out.
Beating the credit card system and outplaying them at their own game is fairly exciting. It’s not complicated, but it does take a little research and discipline:
Step 1: Find the Best Card
The most important step to playing the credit card game is making sure you have a good weapon in your arsenal. The reality is that there are a lot of worthless cards out there, however, there are also some that pay amazing rewards!
With the internet at your fingertips, there are tons of great sites that allow you to compare credit cards and find one that will help you take advantage of the system. For instance, comparing credit cards at Totally Money gives you a category to sort cards from balance transfers, to rewards and cash back, to purchases.
Here’s what to look for:
Step 2: Pay off the Balance Each Month
When playing the credit card game, the ONLY way for you to win and beat the system is to make sure you’re not paying interest. If you pay interest then you lose; do not pass go and do not collect your $200.
Step 3: Don’t Spend More Than You Would Have Otherwise
When playing the credit card game, this is where most people fall short and hurt themselves. As some like to say, “when you play with fire, you’re bound to get burned.” People that pay with credit cards spend about 16-18% more than people paying with cash.
Playing the credit card game and winning at the game are two totally different things. If you want to win, make sure you’re spending within your budget and not buying more than you would have if you’d paid in cash.
Step 4: Use Your Rewards
I haven’t looked at the statistics in a long time, but the reality is that most people never use their airline miles or rewards points! What’s the purpose of playing the credit card game if you’re not even going to take advantage of what they’re offering you?
Step 5: Out-Earn the Annual Fee
If you do find a card that’s too good to pass up and it comes with an annual fee, then make sure you’re earning FAR MORE than what they’re charging you. With the Chase Sapphire card that I mentioned above, they waive the first year’s annual fee but at the 2nd year they’re going to try and charge me $95. Well, I’m here to win at this game and I don’t plan on giving any of my rewards back. Therefore, I have my anniversary date marked on 3 different calendars and I’ll be sure to cancel that card well before that date comes due.
Playing the credit card game goes beyond earning points or cash-back opportunities. Here are a few that I’ve thought of:
1. Balance Transfer Credit Cards – Transferring a high-interest rate credit card balance to a 0% APY Balance Transfer Card is a great way to beat the system and play the credit card game! Many of these cards come with a 3% balance transfer fee, but as long as (1) there is no annual fee, (2) the 0% offer lasts for at least 12 or 15 months, and (3) you’re saving a substantial amount on the interest, then there is little doubt you’ll win the game as long as you focus on paying off the card quickly!
2. Department Store Cards – Most department store cards don’t give cash back, but they do give free merchandise and amazing discounts. Here at the WSL house we don’t carry too many department store cards, but there are a few stores we enjoy and we’re taking advantage of their generous offers. 🙂
3. Airline Miles – airline mile cards are a great way to earn free trips throughout the country. While this isn’t currently part of my credit card game, I can see a time where I look more closely at a few of these offers. My dad has frequently used his Southwest card and he earns 4 or 5 free airline tickets each year; maybe he’ll hook me up with one one of these days.
4. Cash Back or Rewards Points – this is the most common credit card game that people play and it’s an easy way to earn 1, 2, or 3% back on many of your purchases. While I’m not a big fan of 1% cards (as I’d just rather use my PerkStreet debit card), I look at every card that’s willing to pay at least 2%.
Readers: do you look at rewards points and credit card offers as playing a game? I think it’s kind of fun and I’ve been dominating the credit card game. How successful have you been lately? Recently over at Budgets are Sexy, one blogger just talked about how he earned $4,000 cash back playing (and winning) the game!
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