Credit cards are an interesting concept. There are lots of products out there that could be considered both the cause of and solution to all of life’s problems. But you know what? I don’t consider credit cards to be one such product.
These little pieces of plastic can cause a myriad of problems – they make it far too easy to spend money you don’t have. Especially now, with sites like Amazon to tempt us, and where so many people tend to live in the moment and not necessarily plan for the future as much as they should.
And there is more than enough data to back up the idea that credit cards are hugely problematic – the average household has more than $16,000 in credit card debt.
Using your card the right way
But of course, credit cards are not all bad. Hopefully you already know about some of the benefits, but, indeed, credit cards can be a very useful tool in improving your finances – when used properly of course!
For example, I have three credit cards that I use regularly – often charging things to more than one of my cards in a day. Unlike the average household though, I always have very close to zero credit card debt.
Paying ’em off pays off
The key to using credit cards properly, then, comes down to one very simple principle: paying off your balances before they get out of control – many people do this at the end of each month, which is a good habit to have.
Now, I realize that if you are one of those who has thousands or even tens of thousands in debt, this becomes much easier said than done (and that warrants a post of its own).
If you aren’t one of those folks, though, yes, pay your balances before you are charged interest. If you do that, you can take advantage of all of the perks of credit cards without any of the headache. Win-win if you ask me.
Perks, Perks, Perks
I mentioned having 3 different credit cards that I use regularly. Now, there are hundreds of cards out there, and most of them have some benefits that are at least decent, but the 3 I have are working pretty well for me.
For me, using credit cards is mostly about cash back – since I don’t carry balances, the cash back is for me what some call “free money.” I don’t love that term to be honest, but in any case, my strategy is actually pretty basic when it comes to using my credit cards. Here’s what it looks like:
- Chase Freedom. Rotating 5% cash back categories is the winner for this card. The categories change quarterly, so I’ll use it on any purchases that qualify that quarter. Usually it covers things like gas, groceries, and specific businesses like Starbucks.
- Chase Sapphire Reserve. I only just picked this card up about a month ago, but I’m pretty excited about it. I mainly signed up because of its amazing travel benefits, including 3 points on all transactions related to travel and dining. 3 points means 3%. I use it at restaurants probably more than I should, but I have found I get rewards pretty much anywhere that serves food – even at the cafeteria at work! There a whole bunch of other rewards, so if you’re a traveler and/or dine out regularly, it’s worth a closer look. Do note though, that approval odds for this card could be hit or miss for some.
- Citi Double Cash. This is my “catch all” card that I use on transactions where the above rewards don’t apply. The card is named for the fact that you earn 2% on every single purchase – though you get 1% when the card is used, and 1% when you pay it off.
Now, I could probably “engineer” even better rewards, but for now, I am pretty satisfied with them. Citi actually shows how much I’ve claimed in rewards, and after having the card a little over a year, I’ve claimed over $800!. That’s a lot of cups of coffee at Starbucks, or IPAs at the local bar.