mad anthony

Rants, politics, and thoughts on politics, technology, life,
and stuff from a generally politically conservative Baltimoron.

Saturday, March 08, 2008

Using credit cards for fun and profit....

Consumerist has an article about a guy who went 30 years without a credit card, and for some odd reason is proud of it.

There's less than meets the eye, though - he had an amex green, which he didn't count as a credit card because you have to pay it off every month. Except that you can do the exact same thing with a "real" credit card, and according to at least one of the consumerist commenters, Amex will let you carry a balance if you need to.

Go onto any finance forum, and you will find people who insist that you should never use credit cards for anything, because you will be unable to resist the temptation to go out on a spending spree and rack up ginourmous debt. After all, some people have done that, and so nobody should have credit cards. Of course, knives are sharp, and people have stabbed themselves, but that doesn't mean I should have to cut my steak with a spork.

I love credit cards. I don't pay money to use them, they pay me. I've had some sort of credit card since I was 18, and have never carried a balance. I did have one late fee my freshman year in college, after which I vowed never to do that again- and haven't.

There are several ways to make credit cards work for you. The first is rewards cards - lots of cards will give you a percentage back of every transactions, with extra back for certain types of transactions. Use these cards, pay off the balance in full every month, and you will get free money.

Right now, I have 4 cards:
Amex Blue Cash - I use this for almost everything. Tiered cash back - percentage goes up once I hit $6000 in spending in a year. Extra cash back on gas, groceries, drugstores.
Chase Freedom Visa - 3% back on fast food, gas, groceries - I use this at fast food places, and at my local Weis supermarket, which doesn't take Amex.
Discover Open Road - used to be much better, but now only gives 5% back on the first $100 of vehicle-related spending (gas, service, ect) each month. I use it for a couple tanks of gas each month.
Citibank Diamond Mastercard - no rewards. My first credit card. I never use it. I only keep it because it's my oldest card on my credit report.

So the rewards are nice. I usually get about $250 a year back from Amex, and maybe $50 or so from Discover. I haven't had the Chase long enough to figure out yearly cashback. You can also get bonuses for applying for cards - Chase gave me $100 for getting the Freedom card. Plus, there are other perks - I used my Amex to reserve a rental car because of it's free rental coverage. Also, unlike using a debit card, you don't have to worry about insufficient funds, and if someone steals your card number, they are using the bank's money, not money out of your checking account. They also often have good fraud protection - Amex knew someone stole my credit card number before I did, and had a new card to me the next day. You can file chargebacks with credit cards if you aren't happy with merchandise.

But the other perk of credit cards is float - interest-free loans from the time you use it until your bill is due. If I buy something on March 4, I don't have to pay for it until my bill is due in mid-April. If I used cash or debit, I would lose interest on that money for 45 days or so. I will often try to time big purchases for right after the billing period closes so I can take advantage of this.

Granted, there are people who take this to the extreme and do App-o-rams
where they apply for a ton of cards with sign-up bonuses and/or 0% balance transfer promo offers at the same time (so the credit report pulls don't show each other), then deposit the balance transfer checks in high-yield savings accounts. I haven't done this, because I always have this fear that if I did, I would find myself needing credit and wouldn't be able to get it since my report would take a hit once all those cards and balances show up.

But even the average person can use credit cards to there advantage, and as long as you have some modicum of self-control, it's stupid not to.


Post a Comment

<< Home