Let’s get this out of the way right now. I don’t like credit card companies. Credit card companies are not good. Their only intention is to prey on people’s desire to spend beyond their means. They prey on people’s weaknesses to spend beyond their means to have a luxurious or even a very comfortable lifestyle. Their ads are sick and twisted. Often making debt seem perfectly ok.
So, I’m proposing this. Let’s use their rules and benefits to turn the tables. Let’s use them to help build our wealth. In my early twenties, I amassed, what I thought, was a substantial amount of credit card debt. I had just got my first decent-paying job, and I wanted things. I spent like a big shot. I never thought I could get in over my head. But I did. A little here a little there. I was making good money. I could make the payments and pay it off. No problem.
I fell into their trap. I finally came to my senses. It took a reasonable budget, discipline, and a little suffering to get out from underneath the debt. I went cash only. It took me a long time to start using credit cards again. I was afraid of them. Now, I’ve learned how to use them to work for me without paying them a cent. Credit cards are a tool in the financial toolbox I use to help create my wealth. And, I’m going to show you exactly how you can do the same.
Financial Freedom Tip #1; Use your credit cards for the points without holding a balance
I should change that to using the rewards instead of just calling them points. There all different types of rewards. Some are cash. Some are points redeemed for goods. Some people redeem points for airline miles. Every card has its benefits these days to get you to switch. As of this writing, I use a Fidelity rewards card. I earn 2 points for every dollar I spend. I redeem points for cash or gift cards, travel, or products on their site. They have their shopping area where you can spend your points. The important thing here is, that I pay the card off twice a month, so I never incur any finance charges.
If you don’t plan to pay off that card every month, the perks and points mean nothing. But, paying off the card every month is like they are paying me to use their card. The only significant losers in these scenarios are the vendors taking credit cards for payment. Credit card companies take a transaction fee for using the card. Many businesses are getting wise to lose money with credit card fees. They are charging this back to the customer. I’m not paying card fees. In this case, I’m writing a check. Or, I’m not shopping at that business. The points redemption isn’t worth paying the excess service charge for using the card.
Many of these service charges can amount to as much as 3%. I usually see these transaction fee chargebacks on businesses selling larger ticket items. Like cars for instance. Ask if they are charging a fee before you just hand over your card for them to swipe it.
Financial Freedom Tip #2; Use them as a safeguard against fraud protection
When picking a card, make sure you get one with a good fraud protection program. Visa has a zero-liability policy. You are not held responsible for fraudulent charges on your card. There are some restrictions, but for the most part, you can shop worry-free. Check for the specifics on your particular card, but the three I have ever used had this feature. I had a problem one time when someone stole my card number from the Apple iTunes store. On one of my statements, I saw a bunch of charges for music in Itunes I never made.
What was worse, it was just plain crappy music. I called to cancel my card, and the credit card company sent me a form to fill out. I listed all the fraudulent charges. Signed it saying I wasn’t lying about these bad charges. And in about a month, all the charges were cleared, and I had a new card. Recently, I even convinced my parents to stop using their debit cards when they go get gas at gas stations.
We had an epidemic of people in our area installing stripe readers at gas stations. They would steal your credit card number, or debit card number when you swiped for gas. If you used a debit card, there was a direct link to your bank account. Once the money is gone, it’s gone. I told my parents to just use a Visa card instead of a debit card. There is no direct connection to your bank account. Using their Visa card gave them that layer of protection by isolating it from their bank account. Fraud is getting way too prevalent. I use a debit card rarely anymore.
Financial Freedom Tip #3; Use credit cards for their ease of use and security against carrying large amounts of cash
I always keep a little money on hand, but it’s getting less and less. Credit cards are getting way too easy to use. They are accepted almost everywhere. (except my favorite grocery store) With the new chip reading standard, they are getting even safer. Cash can get lost or stolen. With the system, I have in place to pay off my cards twice a month; I’m finding it less and less necessary to use cash at all.
If you get robbed, and your card gets stolen, you can have it reported stolen before he or she gets done even running away. The first time he or she goes to use it, it sends up an alert. Most thieves are getting wise to this and won’t use credit cards stolen from a simple robbery anyway.
Financial Freedom Tip #4; Use credit cards to help build your credit score
Here is my last benefit tip for you on credit card usage. And I’m not sure I’m really in love with this one. There are a couple of different angles to it. Using credit and making timely payments is a way to build your credit rating. In theory. Without using credit wisely, you can’t get a good credit score. In my mind, the only reason to have an excellent credit rating is to buy things on credit.
The only thing I would buy on credit anymore is a house. And I cringed about doing that. I pay my card off every month, twice a month. Some people say to establish decent credit; you need to hold a balance and make payments every month for a while. I’m not a believer. I have an exceptionally high credit score. I haven’t held a balance since the early nineties.
Your credit rating is also looked at if you are a renter. Landlords look at your credit rating to determine if they think you will pay your rent. If you are a renter and want to be for some time, an excellent credit rating might be beneficial to have. I don’t know their exact formula for getting an excellent rating except …
I have a card. I use it often. I pay it off twice a month. I have an excellent credit score. Beyond that, I can’t yet prescribe a good system for getting a good credit score. I will probably dig into it further, and I’ll keep you updated on what I learn. Under the guise of helping people enrich their lives. Credit card companies have a hidden agenda to get you and keep you spending even beyond your limits. Now, it’s time to turn the tables and get using your credit card company to help make you money instead of putting you in debt. Take advantage of your credit card company before they take advantage of you.
Do you already use any of these tactics? Are there any strategies you use to take advantage of your credit card company?
Be safe,
Kevin