It's all about the Credit Cards baby! 4 Steps to Success...
It's reader mail time again, and it's all about Credit Cards! You all know i love me some emails (and comments, twitterings, etc) so don't be a stranger, my virtual door is always open :) And if the stars align, i'll sometimes even blog about it! oooohhhh, ahhhhhh...So yeah, today's post is brought to you by a fellow Budgets are Sexy reader who wants some advice on the old "Pay everything with your credit card" idea. And guess what? That's one of my specialties!
But before we start, you know i have to throw in a quick disclaimer here: Using your credit card like this is NOT for everyone, esp. those who aren't good at managing their money. If you've got that on lock, then continue reading my friend ;)
Here's what my dear reader asks:
"My question is this- I know folks like you swear by using your credit card for daily things, bills, etc and then paying it off each month. (by the way, neither myself or my bf have ANY credit card balances since we decided to buy our house this past year...) Anyways, I want to try this with this rewards card, but I\'m not sure how to go about it. I have online bill pay set up through my credit union for most household/regular bills and just worry about tripping up and getting screwed if I try to use this cc like you say you do. Help? Can you do a post about this, perhaps?"Your wish is my command young lady ;) People use their credit card this way for a number of reasons, but the two main ones for ME are A) To help me budget & track my expenses easier, and B) To rack up a crazy amount of rewards! Plus, you'll actually find yourself spending LESS since you see the amounts build week after week. Here are the 4 steps for Operation Credit Card:
1. Create a Credit Card Budget!
Since you wont' be using debit cards, checks, or cash all that much now, you'll have to make sure to have enough to pay off your c/c balance each month. VERY IMPORTANTE amigos. The first time i did it i just guestimated and came out $200 short. Not. Fun. Here's a look into my own credit card budget to help get you started. Remember, it doesn't have to be all that complicated...
2. Find a Credit Card w/ Cool Benefits.
Everyone has their own soft spot - free mileage, gas rewards, cash back, there's a whole mess of them out there. Once you have a favorite, do a little research and check around for the best cards that focus on it. Pf Blogs, financial magazines, they're all great for finding them. I use USAA's Platinum Rewards card to get cash back, but you have to be affiliated w/ the military to get it. Here's a few others i found in Money Mag the other month, and also some of MyMoneyBlog's favorites to help get ya started.
3. Now, Use the Credit Card for Everything You Possibly can.
Cell phone bills, utilities, car insurance, life insurance, lunches, presents, tv/internet/phone, etc. Whenever it's time to spend money, try using the credit card first. Unfortunately (or fortunately?) you can't pay off ALL things like mortgages or car payments with it (well, you *can* but you'd have to use the cash xfer option which you NEVER want to do), but you can get pretty close.
4. Pay it off IN FULL Each Month!
Seriously, don't forget this - it's the most important part :) It may take a few months to get used to 100%, but it'll be second nature soon after. It can actually be pretty fun too - each month you get to see how you compare to the previous month! woohoo! haha....
There's a couple ways to pay here and stay out of trouble. I prefer using my bank's online bill pay over automatic anything simply cuz i'm scared $hitless of overdrafting my checking account accidently. If you manually pay it each month, you're more likely to stay on top of it! And if you're worried about forgetting, well, that's what we have Gmail/Outlook for! You can easily set up customized reminders and calendar events to help remind you every month. Plus, don't forget you'll still get the monthly credit card statements in the mail (or emailed) too.
And there you have it - the 4 steps to get in on Operation Credit Card! Again, it's not for everyone, but it sure is for Rock Stars :) It's all about maximizing the benefits baby!
Labels: advice, budgets, credit cards, reader mail
posted by J. Money at
11:32 AM
14 Comments:
A lot of retail stores are limiting which cards they will take. This weekend I went to buy tires and they would only take cash or AMEX?!? I think everyone is a little skeptical that the broke fools (like myself) will charge more than they can handle (unlike myself). So make sure you bring a back-up payment method. "Im not broke I still have a full box of checks!"
Thanks for pointing out that credit cards CAN be a valuable financial tool. We earn about $200-$300 every year through Discover's cash back program. That money typically goes towards home improvements and the ocassional mini-vacation.
I've never had a problem with someone accepting Discover or our backup Visa card. I guess they just won't get my business. To be honest, we never even bothered ordering paper checks - we're completely electronic.
We do carry $10 cash for "emergencies," because my husband refuses to pay for fast food with credit. They do accept credit cards though, scarily enough.
That's basically what we do, only we have two cards a Visa and a MC for the places that don't take one or the other.
People say you have a harder time tracking cc purchases but I find it to be the opposite.
I really hope that that I can get to the point where I can control credit card like that. Being a student and all, money is extremely tight. The money always come out short and the bill is continued to increase month after month. If I can be able to paid the credit card in full each month, I will be happy. I have read an article titled: " Credit cards are cool", forgive me to say this but right now that is not closed to what I feel about credit cards. But all in all, I enjoy this post.
AHA! That is exactly what I was looking for Mr J! AND, I guess it makes sense to me to be letting my money earn the high interest in my savings/checking at the CU, then be paying off the CC interest-free all at once! Thanks so much for being awesome and responding to my questions! Now I just need to sit down and figure out my numbers and do it! VERY Sexy! ;)
Awesome!!! I'm glad you found it useful NorCalRN :) You're totally right, saving that money in your credit union is def. the way to go. Using a credit card gives you 30 free days baby!
@JD Maybe - really? that is so odd i've NEVER heard of that. i've used both a MC and a Visa over the years and have never once been turned down...maybe you shop at "specialty" stores ;) giggity, giggity!
@Stacey - i'm glad you liked it! Cards are one of my favorite tools...i'm just waiting for the swipey things to hurry up and attach themeselves to vending machines! aww yeahhhh...
@Les@SpillingBuckets - oh that's a good idea, haven't thought about doing that. and yeah, a lot of people say it's hard tracking expenses through the card - i guess it's hit or miss?
@frugalgrad.com - All in due time my friend :) I def. remember the days of fenagling through school on little money, and even more so after graduating. It's great that you know right now is not a good time to mess w/ credit cards! knowing yourself is key.
I used to pay for all of my groceries and other miscellaneous stuff on my Amex but I'm now using my American Airlines reward card. For once in my life, I'd like to fly business class or better on an international flight, dammit, and I will charge my way towards that goal! (And unlike my reckless past, I shall pay off my cc every month!)
actually at my work our vending machines to take credit cards J...although I dont know why, we all have cards that gets us free food from the machines anyways....
great post though. I hate my credit cards right now because I kind of maxed them out in the past...but I do like the concept of credit cards. I just need to get rid of the huge balance before I can really "enjoy" what a credit card can do to work for me - and not the opposite.
hell yeah! business call is freakin' sweet. i used to work for the airlines and would just fly around so i can hang out in there! haha...well, that and travel for pennies.
PJ - that is awesome!!! i'd be charging up a storm, so it's prob. good i don't have access to that :) and soon enough you'll be able to master those cards...just a matter of time.
That should boost your credit score as well. I'm still in college, and I could definitely use the positive credit history. I don't even want to know how hard it will be to get a house now with everything that has happened, so it's pretty essential to have good credit.
Yep, this is the way I've always done it. I hate how everyone I talk to associates credit cards with debt whenever I talk about them, because I definitely don't use them to borrow money and get into deep debt with high interest rates. More people need to learn how to properly use credit cards to benefit from them to redefine the credit card stereotype.
@Blake - so true! i didn't even think of that. something else to consider is increasing your line of credit w/ the c/c (again, if you can manage it responsibly) to up your non-debt ratio :)
@Claire - i know, credit cards get a bad rap for sure...as do interest-only loans. every tool we have out there can be used for good, or used for evil - and it's a shame that most fall into the evil trap :( i can only hope things will get better though!
If you are paying off minimums on you are spending more than you make and if you keep up this habit and pay it back later you may be surprised at how it will affect your spending.
@John - we're not talking about paying off minimums at all here, only paying it off in full each month = no interest.
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