I never did finish my Methods Marathon, and Credit Cards was one of the topics I had wanted to touch on and update everyone with what is available right now out there. And, I get emails quite often asking what cards I use.
First, I would like to start by making sure everyone knows the rules of making money with credit cards. And, I will also be recapping my original credit cards post from last year for all my new readers.
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 method 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. $40 fill up at the gas station? You had better have charged that! EVERYTHING! It all adds up.
4. Do not overbuy because you have a credit card. So, many places I have read or seen on the news that families spend more when they have a credit card vs. cash in their pocket. I do believe this is probably true, if you are not frugal minded. But, if you are someone who has been reading my blog long enough, working a budget and know how much you can spend for each part of your budget, it is much easier to not overspend. If it helps, do the envelope system ( if you have ever used the cash envelope method ) and put your budget on the outside. Everytime you buy something, stick the recipe in that envelope and mark it off your total...so you know how much left you have to spend. It is a nice workaround, but you can earn money now!
4. Do NOT apply or own a credit card that charges a fee every year. Unless the value of the rewards are so "worth" this annual fee, there should be no reason to pay a fee. Most reward cards do not have them.
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.
With a credit card, if someone steals my card or my number or any charge appears that is not valid, I don't have to pay it. Yes, that is right. I call my credit card company and they work it out with the provider or the issue if it is stolen. Money will NEVER immediately be taken from my checking account. What a great safety net!! Of course, if it is found out that the charge was valid, you will be required to pay it later. :-)
With debit cards, even if the bank will eventually refund your money if someone steals your card or number, you are still out the money until they do work it out. What if you don't have alot extra for bills, etc? Now, checks can be bouncing, etc. And, believe me, this has happened to someone close to me, so I know.
Finally, if you use a credit card, you are paying your bills a month in arrears. This means, your money sits in your checking account a month longer earning interest ( you do have a High Interest Checking account, right? ). This adds up to even more money in your pocket.
Now, how do you keep your credit cards straight with the rewards? For example, I have many. Some pay higher on gas, some on groceries, etc. 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". 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!
SOOOO...what cards do I have right now? Well, with this crazy economy and market, the credit card offers don't seem to be as great as they were a year ago. :-( But, I do still have a few I like.
It is a wonderful credit card because they pay 5% back on Gas!!
But, please read the terms/conditions. How it works is that you get up to 5% of a $100 back a month. After you have bought $100 of gas in a month, you then only get 1% back. So, in total, you can get 5% on $1,200 a year.
What is a possible work around? Open an account for yourself and have your spouse also open one. Now, you both have up to 5% of $2,400.
Why else do I like Discover? They allow you to cash out and relatively low balances. In the past, I was always able to cash out at $20. I would have it applied directly to my statement and short pay my next payment that amount. And, you will still get paid at 1% on other purchases.
Click here to get your card.
Other Cards?
Well, I know a lot of you email me about the Utilities card I had last year...paying me 6%! Loved that one! But, it is gone...sorry.
I do still like a card that pays me 5 points in Thank You points at the gas/grocery/drugstore. These 5 points can then be redeemed for gift cards at approx. a 5% return to you.
You will get 1 on other purchases. Want this card? Click here
Why do I still have the Discover if this card will pay me with 5 points? Because I would rather get a cash refund if possible, then a gift card, which I can with Discover.
And, stay tuned, I will be adding a Credit Cards button and webpage soon. As new and wonderful credit cards become available, I will definitely let everyone know.
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6 comments:
Great advice! I love my Discover Miles card (we fly a few times a year) and use it for everything I can. I wanted to mention, though, that your available credit does affect your credit score. So if you have 5 different cards, even with only 5-10K limits (and even if you don't charge much on them), that's a lot of available credit. Everyone should consider their credit history before opening more than one card account. Thanks again for the post - I love your site!
like megs02 is saying that is my concern too.. your amount of available credit as well as how long you had the card open.. so it's not as simple as to "move on" once the promotional period is over, at least not if you care about your credit score. I have a Discover Miles card too that I'm very happy about, at least I was until the promo period ran out. Now I don't want to close it since it's the card I've had open for a longest period of time. But it's just not as good without the free miles I got the first year- and when I called I was told that I can't take advantage of opening offers of other Discovercards so I have to look into Amex or something else now. Thanks for the post :)
Make sure to read that article I link to....open credit can affect your score, as I described, if not using is appropriately.
Right now, we have over $20K in available credit thru all our credit cards ( we don't close them, as we get new ones ) so tons of cards that haven't been used in years ) and only use a portion of that each year and pay it off.
My credit score is in the Excellent range and not far from the top of where you can get.
They calculate more on your history of how you spend and pay off then how much credit you have
In fact, if you have little or no availalbe credit on your history, this often makes it difficult to have a decent credit score.
I knew someone ( won't name names ) who had their house paid off, makde VERY good money, paid all their bills on time, and finally decided to open a credit card to get rewards points.
They denied them because their credit score was bad....because thy had not credit to prove they spent wisely.
As you mentioned, though, you should check your credit score regularly to see where you stand, and see if you can open a new credit card that year.
Anna,
Because of this economy, it may be harder for anyone to open new credit cards. All you can do is apply online and it will either say yay or nay.
I have had no problem having multiple cards. And, I agree, you don't want to close old cards..you want them to stay on your account.
The other option, is many card companies will "move" your card over to a new card. So, they will reissue a new card under the new promotion, but it still links up to your old "history".
All things are up in the air with the credit industry right now, but if you apply for the new Discovercard online and it doesn't accept you, then give them a call and see if they can move you over.
Carrie, one that I'd recommend that we use is through Chase - we get 5% back on grocery, pharmacy and gas, and we can get a $50 check once we reach 5,000 points (gift cards are available as well).
But it does have a max of 30,000 points each year, so we have a World of Warcraft credit card that allows you to earn free game time. That might not seem practical to others, but it is a good investment for my husband and sons who adore that game, and I love not having to pay the monthly fee!
Hi Carrie! Thanks for your great site! I always love seeing new posts from you.
I have another option for the gas credit card. I keep telling people about it, but no one ever responds or does this deal, and I'm not quite sure.
Most GAS rebate cards have CAPS or limits, like the Discover card you mentioned above--where it drops from 5% to 1%.
BUT...the Pentagon Federal Card give 5% back and has no cap or tier system!!!
If you do not have a family member in the military, you will have to pay $25 for the card, but THAT IS IT!
A friend of mine owns a dump truck business, and he was always running into caps, limits, and tier problems.
He did a deep internet search and found Pentagon Federal. He paid his $25 and signed up!
I have a brother in the Navy, so I did not have to pay the $25, but we both got the card, and it is great!
In fact, they take the 5% right off your bill, so each month, your bill is 5% less than what you actually bought! FANTASTIC!!!!!
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