As you will soon find out after you read this article, I am a huge supporter of using credit cards for EVERYTHING possible!! The benefits are so numerous, that I just don't understand why everyone doesn't get on this band wagon.
But, before I begin promoting all the upside to credit cards and how much money you can earn, I first need to make sure we are on the same page as far as the rules!
1. ALWAYS, ALWAYS, ALWAYS pay your balance off in full!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! I cannot stress this enough. If you are not going to do this, then skip this article now. I don't want you even reading my advice. You will not make money, but simply lose far more than anticipated. The interest rates on credit cards are too high for you skip even one full payment. Don't do it! Always pay it off!
2. Reevaluate your credit cards each year and their benefits. Many times, the original offer you go for with free incentives and money back is only good for 6 months to a year. Once these incentives run out, it is time to move on.
3. Pay everything you can with your cards! $1.50 charge for candy at Walgreens? Yes, absolutely. $1000 new TV. You had better have charged that! EVERYTHING! It all adds up.
4. Do NOT apply or own a credit card that charges a fee every year. There are so many good credit cards out there for free, why would you pay an annual fee? It does not make sense.
OK, let's get started.
To start, why do I love credit cards so much? Well, they give you cash back or other incentives. And, as we can all tell from this website, I like to save and earn money for my family. So, I am not one to look a gift horse in the mouth, that is for sure. But, beyond getting money back, I also like the safety of using a credit card. I will never understand those people out there who use debit cards? I love my ATM card, but I am a outspoken opposer of the debit card. There is no safety!!
Here is an example. My parents had a debit card and while visiting a relative in a nursing home, someone stole my mothers debit card number out of her wallet. She didn't even know it, because the card was still there. They simply took it out, wrote her numbers down, and put it back. It wasn't until my parents checks started bouncing, then they knew something was wrong. Their checking account had been depleted by online purchases with their Mastercard debit cards number to a foreign country where they were buying music CDs. Because it was out of country, the police couldn't do anything. Meanwhile, some people have the safety catch on with their bank that if their checking accounts checks would ever bounce, they would pull the money out of their savings. This would prevent them from getting over draft fees. Yikes! Now, their savings was at the full advantage of the theives as well. It is not worth it.
The advantage of having credit cards instead? It will still be a Mastercard ( or whatever you choose ) so you can use it to pay at all the same places. You don't have to pay the balance until the next billing cycle. Thus, your cash stays in your high interest checking account longer, thus earning you more money. Finally, if someone steals your credit card or credit card number, you don't have to pay the balance until the credit card gets it all figured out ( which means, you may never have to pay it ). Unlike the debit card, when it is stolen, the money is taken from you immediately! Anyway, to move on.......
For the last couple of years, I had been floating along happily with my Discover Card, making 1%. And, I was making 5% on Gas. Well, until they changed the terms to a max of $1200 a year with a limit of only $100 a month, I was happy. With gas prices skyrocketing, after only 3 fillups, I am over my $100 for the month. Also, I had one extra Mastercard for those few times when Discover was not accepted. I got money back towards State Farm with that card. So, I was content. I was making a little bit on my purchases.
Then, I happened upon a flyer for the Citi Drivers Edge Credit card. I would get 6% back on gas purchases, groceries and drugstore purchases. 6%!! Plus, I turn in my starting mileage and I get money back for every mile I drive. Did I mention 6%! Anyway, I couldn't believe it. Wow, that is a lot of money. And, I know I spend a lot on gas and groceries each month. And, it wasn't only good at one gas station or grocery store chain, like some cards. I loved it! So, I started looking into it. Sure enough, the details did say the offer was only good for one year. Fine, what do I care? I will cancel it in a year and find a new card with great incentives. Once I started looking, I noticed they were everywhere. It wouldn't be a problem. The only other difference was that the money had to be used for buying or leasing a car ( you have 5 years ) or automobile work ( this includes oil changes, etc ). So, this worked fine for me. We have our oil changed on two seperate cars regularly, plus we will be buying a new car soon.
Now, if that doesn't work for you, don't worry. You can get 6% in other ways with other cards. This one just worked for me the best. Well, after I noticed that I could get back such a large amount on certain buying trends, I did a search on utilities. Sure enough, you can get the another card ( email me for the exact name and details ) and get 6% back on utilities, trash, cell phone usage, home phone usage, and cable/satellite. Once again, these were things I had to buy and spend money on monthly, so I signed up. It is great! I have been earning all that money back on my monthly expenses. And, the catch on this one? Well, the cash back has to be applied to my mortgage. Sure, fine, I don't care....show me the money!!!! Again, if you have your house paid off or if you rent, this card allows you to put the credit against your balance ( which is like getting cash ).
Next, I did a search on restaurants. And, guess what? Yup! There is a credit card that pays a high percentage back on these purchases as well.
Now, you may ask, how do I keep them all straight. First of all, the credit card came in the mail and I immediately set up my utilites, phone, satellite, etc to automatically pay to it each month. I then took the cards and cut them up. I didn't need them for any purchases outside of those automatic ones, and then I wouldn't accidentally use it for something else.
Second, the ones in my wallet ( and my husbands ) might get confusing. So, I bought small labels, and printed on them what they were for and then, I stuck it to the face of the card. So, now when my husband is at the gas station, he looks at his credit cards and pulls out the one that says, " gas, groceries, drugstores ". It doesn't get much easier than that.
You may be concerned about having a lot of credit cards and that it will play havoc on your credit score. But, you should be fine, if you understand the basics. First, having credit cards is actually good for your credit score, IF you aren't overspending to your limit, are paying regularly( which you better be ) and you show that you have good purchasing control. This means, simply put, that if you have a limit of $10,000 between 2 credit cards, and you are only spending $1,500, it shows you have self control. If you have $10,000 available and you are spending $9,500, it could raise a flag that you are in trouble. If interested in how credit scores are calculated, click here for a great article. But, you do want to watch and decide up front which cards you want. Everytime you do a hard inquiry ( meaning you apply for credit ), it stays on your credit report for a year to two years! So, don't apply for more cards then you need. Figure out upfront which cards are the best match for you!
Finally, to finish up, here is a great link to compare MANY, MANY credit cards, if you didn't like the cards I have listed above. Click Credit Cards or on the picture at the start of this article. Simply scroll through and click on each credit card to check it out. Once you have decided which cards you want, simply click on it to sign up. Then, away you go to earning a lot of free money! Currently, I am at $531.14 and counting for the year! And, I didn't sign up for my 6% credit cards until late summer. Think how much more I could have earned!
My recommendation to you, right now? Take a look at your current cards and then scroll through and see what cards would make sense for you. If your have a mortgage, I highly recommend the 6% Card that pays on Utilities ( email me for details ). You will want to use it for all utilities and home expenses. If you do get oil changes and buy new or used cars ( or lease them ) every five years or so, go for the Drivers Edge card ( updated 1-26-08, not sure if this card is still available ). But, let the money you spend work for you! Why not?
Update 3/6/08: Check on this post to see how you can get 6% back on all credit card purchases!