Remember Darla? She married Quasimodo, who is one of those people who is good at everything. He always wants to compete in as many things as possible and doesn’t understand why nobody else wants to join in. It’s because he’s the only one in the group who would be good at it. It’s so miserably annoying. I honestly don’t know what she see’s in him.
Just kidding. He’s alright. He’s actually one of my best friends, that Quasimodo, and it’s his fault I even started a blog. So… he can stay, I guess.
Now, Quasimodo got his first credit card when he was in college, an acquisition I do not recommend at all under any circumstances. His thoughts upon acquiring this devil tool? I can golf whenever I want. I can eat Wendy’s every day.
He, like the stereotypical credit card getter, ended up accumulating a very significant amount of debt. He has grown up since then (sort of), but this type of behavior transcends age, gender, race, social class, and education.
Sort of like the black plague.
As I’ve said before, there is one way and one way only to use a credit card. I cannot stress the importance of doing exactly as I say in every single category listed below. I know many experts would say to never get a credit card. I was once on board with them, and I still agree to some extent. It is safer to not get one, period. But there is a way to do it. It is just imperative that you LISTEN TO ME!
Smokin’ Hot Wife and I made it through our debt without a credit card. We built up my credit without a credit card. We bought two different vehicles and got excellent interest rates without a credit card. We bought a house and got an excellent interest rate without a credit card.
Nobody needs a credit card. You can do without it and be just fine. More than fine. You can be better off than most.
I’m not telling you to get a credit card. I’m telling you how to use it if you get it.
Before I begin, an important Disclaimer: If you are currently in debt, do not get a credit card. If you currently hold other credit cards with a balance on them, do not get another credit card. Pay them off, cut them up, start over if you must. Do not let the world’s way sweep you off your feet and drown you in it’s pictures of wealth and prosperity that only lead to ruin.
If you don’t already know, rewards, or points, are accumulated according to how much money you charge to your credit card. Your points can then be used in place of money on later purchases. Ours converts 100 points to 1 US dollar, or more in certain situations. For instance, if we use our credit card towards travel expenses, 100 points is like 1.5 US dollars. But it never drops below 100p=$1. AND, if you want to, you can shop for different things through the credit card’s website and find products that will reward you greater than they would in store or elsewhere online. Pretty neat.
There is no point in getting a credit card that does not offer rewards (Yea, I know. Raise your credit, blah blah blah. Gold Credit, Green Credit…). If you have a card now that doesn’t offer rewards (I don’t even know if they exist), pay it off and shred it. It’s useless.
There are many rewards cards out there; you can search for which one best suits you. If you travel often, get one that offers double points on travel, etc. We got the exact one Quasimodo has (he’s now free from credit card debt) because I didn’t feel like searching for the “right” one. And he got like 10,000 points/100 dollars just for referring us through email. Kinda selfish.
Most of these rewards cards will have an annual fee, but the first year is normally free, and if you do it right, you can just use your points to cover the yearly fee and never have to pay a dime.
Well, you will. But they will be free dimes that you got from your rewards.
If you listen to me, you will receive free money from your credit card. Actual. Free. Money.
2. DON’T SPEND WHAT YOU DON’T HAVE
You’re familiar with using your debit card for every purchase. It’s the only card you have in your wallet, and you wouldn’t dream of over-drafting your bank account.
What? You still carry cash? I don’t believe you.
Keep that mindset when using your credit card. You’re already budgeting (if you aren’t, you need to get the eBook; it’s on my website; just do it). You have a limit on what you can spend every day or every week. Don’t lose that mentality just because you get a credit card with a $5000 limit. DO NOT SPEND UNLESS YOU HAVE THE MONEY IN YOUR BANK ACCOUNT!! That $5000 limit doesn’t mean you all of a sudden have $5000.
If you don’t listen to me here, I will be angry with you. If you do not use a credit card my way, you are losing. My way is proven. Listen to me. Your credit card isn’t with you so that you can go buy whatever you want. You have it so that you can obtain a little bit of free money and raise your credit WITHOUT adding to your debt.
The way your credit card provider wants you to use your credit card is NOT the way you need to do so. Listen to me.
I don’t think I’m making myself clear enough. If you only had a debit card last week, and you were scared to spend $100 throughout the week, be equally fearful of spending $100 this week even if you have a new credit card. You do not have free money just because you have a credit card. Listen to me.
Home Slice, you have to pay that money back. And just in case you weren’t paying attention when you signed up for it, you have to pay it back plus 25% interest. No, I’m not exaggerating. And they’ll make your minimum payment low enough to make you think you’re doing just fine. Nope.
If I haven’t already told you, if you pay your credit card bills the way the credit card giver wants you to, you’ll never pay it off. They know that. They don’t care.
Oh, you have a family? They don’t care. You’re behind on bills? They don’t care. You didn’t realize what that $5000 limit was? They don’t care.
They. Do. Not. Care.
Listen to me. If you miss this point (point #2: don’t spend what you don’t have), just don’t get a credit card. Ever. And, please, don’t associate your recklessness with Screw Debt. I don’t need a bad reputation. Let me actually have a reputation before there’s a chance to ruin it.
3. DEFINE EMERGENCY
Unfortunately, many a person will consider an emergency as a new dress or golf club set that’s on sale. Terrible, terrible ideas…
How you gonna play golf in a dress?
Even a doctor bill or a trip to the ER isn’t an emergency, monetarily speaking. Hospitals set up payment plans like it’s going out of style these days. AND THERE’S NO INTEREST!
Don’t use a credit card for an emergency. I’ve found that the best place for an emergency fund is a simple, fluid account of some sort. Yes, I know they don’t always accrue you a bunch of interest. Yes, I know you want to invest. Blah blah blah.
How much money are you saving? If you have 50 thousand dollars, go for it. But why the heck are you reading this? If you invest $3000….. I mean do whatever you want with that, but it isn’t worth the effort. That 3 grand is tied up; you can’t retrieve it whenever you want, and I doubt your return is as much as you think it is.
But what do I know?
Your savings account isn’t there for getting rich. It’s there to be safe and ensure that you have money for a true emergency. I realize that there are better options than a regular savings account, and that’s fine. Use it. But make sure your money is fluid and that there is no risk involved. I’m not telling you not to invest. Just don’t invest every penny you have and not be able to grab some when you need it.
I’ve heard some money folks say it’s good to have 3 months of whatever it takes to live for 3 months saved up for an emergency fund.
Well… I’m not so sure how doable that is. That’s a pretty significant amount of dollars for most people. If you or you and your other have steady careers, and you know exactly what your income is and how much it takes to live month to month, then I can understand this method.
But if you’re like me and my wife, who do not have guaranteed money and were once at a point where our savings account had $5 in it because that’s what was required to open one, this method certainly isn’t a set in stone approach. Gotta get creative. Discuss and determine how much you need for an emergency fund, and decide what a true emergency is.
For those of you keeping count at home, I’ll offer my own definition of an emergency:
A payment for myself or an immediate family member that MUST be paid in full and at once to avoid any and all types of interest or late penalties.
4. USE IT EVERY DAY
Again, this credit card is your new debit card. Use it for everything. You may not ever need to use your debit card again. In our case, our stupid credit union requires a whole bunch of stupid stuff every month in order to not have a $5 fee charged to us for using their debit card.
Most people don’t have that issue, and we will change our situation soon. We have to use our debit cards at least 10 times per month. It used to be 5. Apparently it changed to 10 without me knowing about it. There’s a way around it. We just use them on purchases that are less than $5, but it would just be so much easier to only use one card at all times and not have to think about it. If you are in the same boat, follow our method if you must. Just beat the system.
Otherwise, just use your credit card. They have chips these days which protect from identity theft more efficiently, they look cool, and they fit perfectly in your wallet. Crazy, right? Who knew?
5. PAY IT OFF EVERY WEEK
Every week? you ask?
Yes. Every week. Or at least regularly and more than once a month. There is a grace period of at least 21 days from the time you make a purchase on your credit card until it begins to accrue interest. But we will NEVER ACCRUE INTEREST ON OUR CREDIT CARDS.
I will deny you as a follower and swear that I never knew you if you don’t listen to me. You have my permission to make a payment every 2 weeks, but no longer.
Every Friday morning I pay off my credit card’s CURRENT BALANCE which will be everything I spent money on the past week less a few pending transactions. Those will be paid off the following Friday.
Got that? Every Friday morning, before work, pay off current balance. Not minimum due. Not other amount. CURRENT BALANCE. If you do this, you will not pay a penny in interest. You also won’t overdraft because you didn’t use your credit card this week without having the funds in your bank account, right?
right? right? RIGHT!?!?
I’m telling you, people. Do as I say. Do it.
6. USE YOUR POINTS
We’ve had our credit cards for such a short amount of time that we have not used our points. But we certainly intend to.
You can do it however you like, rack them up and pay your bills for a month once a year, use them once a week on a meal out, use them for a new dress to play golf in, whatever you want.
There’s just no point in accumulating rewards if you aren’t going to use them.
The card we got actually allows the rewards to increase in value when used for travel. So we intend to use it for trips that we haven’t taken in a while. Fifth anniversary? Credit card points. Boom.
Also, don’t forget that you can also cash in your points and they’ll send you a check. Mmm. That sounds good. I’ll have that.
Debit cards are sooo 2012. All the cool kids are getting credit cards. But they ain’t cool unless they win. And they don’t win unless they
Do not conform.