Credit Cards Are My Best Friend. Why Aren’t They Yours?

Credit cards are my best friend.

I like to joke that credit cards are my best friend. It’s a known thing in my circle. So much so, that for my office Christmas party my coworker ignored the wish list I sent him and bought me a credit card holder instead.

Many of the luxe strategies I talk about involve working your credit cards like tools. I’ve got 6 of these tools. No matter how many I open my credit score tends to hover around 800. And I haven’t paid a cent in interest in years.

But you know what? Not everyone is a superstar when it comes to credit cards. So I thought I’d hit pause before proceeding with regular programming. Because I want to make sure we’re on the same page about how to handle credit cards: that being insanely good with them involves a ton of personal responsibility. This is especially important, because as of 2016, with high-end credit cards like the Chase Sapphire Reserve crossing the mainstream, we’re now officially using credit cards more than ever.

To many people, credit cards are evil. I’m not one of those people. For me, not taking advantage of rewards that credit cards offer is basically like leaving money on the table. I’ve been able to mine thousands of dollars of value from them that I wouldn’t have been able to with cash or debit cards. A wise man once said (OK, really it was my SO): Credit cards are kind of like dynamite: in irresponsible hands they’re dangerous, but when harnessed properly, they can move mountains.

Mountains can be things like, taking your family on a bucket-list trip for practically free. Or, staying in a $1,000 per night hotel for your honeymoon. Or rolling up to first-class boarding when usually you’re like, Zone 43. Or making a $200 mistake purchase that’s ‘final sale’, but then getting reimbursed by your credit card. Or breaking your phone past the one-year warranty mark, but leveraging your card’s extended warranty benefit to get a new one.

So, how do we use credit cards to move these mountains? You have to own the credit card, and not let it own you. To do that, first you’ve got to let go of the fear mentality.

These are the types of things that people who have a fear mentality do:

  • Refuse to get a credit card, using debit or cash only.
  • Call credit card companies “scam artists.” (Well, they kind of are.)
  • Oh yeah, and those people who take advantage of reward opportunities? They’re also “scam artists”.
  • Freeze their credit cards in blocks of ice to avoid temptation.

I had a roommate like this once. She said she didn’t have a credit card because she didn’t “trust herself” with one. Nevermind that she had a hard time getting approved for the apartment we lived in because she didn’t have any credit.

I refuse to let a credit card have that kind of power over me.

I make credit cards work to my advantage. I get a free, short-term loan, and in return, I get cash back rewards for things I’m buying no matter what, and nearly-free plane tickets to places I’m going to, anyway. So, now, who do you think is in charge?

Do you want to be someone who lets a little piece of plastic own them, or do you want to be the boss?

Second, you have to understand how credit cards work. Maybe this is Credit Card 101 for you, but reminders never hurt.

It is NOT free money.

I don’t know where this idea came from, but the factory who’s pumping out this idea needs to burn down, stat. When I was a freshman in college, I was walking downtown with my friend when a guy set up at a table stopped us. “Hey,” he said. “Do you want a free T-shirt?” I shrugged. Sure, I did. I signed the paper, which actually ended up being a credit card application. And that is my embarrassing story of how I got my first credit card. I didn’t fully understand how the statement cycles worked, and I remember calling customer service to have them explain it to me. Credit cards are confusing on purpose. If you don’t know something, don’t be afraid to call up the bank and have them walk you through how it works. While the statement balances were hard for me to reconcile, the fact that I was borrowing money was crystal clear. I never saw it as free money I never had to pay back, but just a way to buy some clothes online that weren’t available in my city. A tool.

You do not pay the minimum payment.

If you do, you’re letting the credit card gain the upper hand. Think about it this way: let’s say you charged a $100 dress to your credit card, but only pay the minimum payment. If you had an interest rate (or APR) of 20%, that dress is actually costing you $120. When you log into your credit card account to make a payment, the only payment option you should care about is the full ‘statement balance’. Otherwise, it’s way too easy for the interest to snowball out of control.

You pay on time, always.

Whenever I have to pay for something I always swipe my credit card so Mint automatically tracks it for me. When I get a credit card bill, I flag it in my email. I usually pay the full balance the same exact day. But if I don’t, I have those little email flags to remind me. And if not, then Mint will automatically send me reminders of the due dates. All of these little habits add up to a system. I have two systems in place to help me pay my bills on time. But what if the payment due dates are inconvenient, like right before I get paid? Or if you have multiple cards (like me), and there are too many dates to keep track of? My question to you: Did you know you can change your payment due date? If you’re an introvert like me, it’s super easy to do it online without having to talk to a customer service rep. Take control and change your payment due dates if the current ones are making it harder for you to pay on time.

You do not charge for amounts you do not have.

When I was in my early-mid twenties, I got myself into about $6,000 of credit card debt. I couldn’t afford my lifestyle. I had no idea what my expenses were. I didn’t have a budget. At some point, I wondered about how I was going to pay my rent. And all of this was 100% my fault.

Always have a sense of how much money you have in your bank account. So, if you’re considering a pair of $100 shoes, before you swipe, ask yourself:

  • Do I have enough to cover this in my bank account?
  • Is this money already spoken for, like, any upcoming bills?

If you have some sort of tracking app or system on your phone, it will be a lot easier. The more you track, the more intuitive your purchases become. I honestly check my money every single day. Some would say that’s overkill, but the system works for me.

Final Thoughts

And that’s my honest take on credit cards, because if you have trouble with any of the four steps above, then my strategies might not be for you. One of the main purposes of this site is to empower you financially. For that reason, I so want you to handle credit cards like a total BOSS, so they can be powerful tools, not shackles. Because if you do, you’ll be able to unlock some fabulous benefits. But tread carefully.

What’s your point of view on credit cards? A tool, too scary, or just plain evil?

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  • Dr. Curious

    I have 3 cards: Chase Sapphire reserve, AMEX gold rewards, and an old Capital one no hassle that I’ve had for 15 years. I use mostly the Chase and AMEX and have a bunch of points which I primarily use for travel. We flew 3 people to London last year with reward points!

    My parents were in the “minimum payment” mentality when I was growing up; it didn’t quite ruin them financially, but they wasted so much money on fees and interest. I learned what not do to from them, and interest (at least on credit cards) is a dirty word in our house!

    • Yeah, I’m pretty sure I have relatives in the “minimum payment” camp. I think in their case they actually don’t fully understand how the interest compounds. It’s a lot easier to just ignore it. So for now, they just pay the minimum, and the balance just never seems to go down. I’m glad you learned from your parents what NOT to do!

      Congrats on a successful hack to London. I hope it wasn’t British Airways–their fee suck!

  • Church

    You are spot on by saying it takes a ton of “personal responsibility. If you have the discipline, there is very little reason to use cash because you are getting nothing back. I like treating every day life like a video game and earn as many points as I can while I go through life. Once you learn how to double dip on points, you won’t ever spend another dime on birthday presents, holiday presents and vacations.

    Using your card is kind of like being on the old USA Gold Standard before it was repealed by President FDR. The idea being that you are only able to spend what you have in your bank account.

    • I’m like you where I tend to “gamify” my money. There is no online purchase made without checking portals. EVER. And the double dipping of the points is a game changer. But I totally get that some people are naturally more prone to “present bias”, so it will be easier for them to overspend on their cards. I remember my first credit card–I don’t think my balance ever got over $85! My mind just didn’t go there.

  • Former New Yorker

    YAAAASSSSSS!!! I don’t know how many conversations I’ve ended early because people look at me and my eight credit cards like I’m a shopaholic. They don’t understand how I can control myself because they don’t know how to do it.

    Once someone told me, “I have a friend who gets all these credit cards. He does it for the wrong reasons, he just gets a credit card for the reward bonuses.” Ummmm, as long as he’s paying off his statements, that’s actually a great reason to do it?? I never know how to continue a convo after that. People are backwards when it comes to credit cards.

    I used to tell people, “we’re paying for our honeymoon flights via miles by putting the wedding on credit cards” before I realized that they thought I charged everything to the card and now we’re thousands in debt! Not the case, I just charged my wedding to the card, paid it off in full every month, and got a ton of bonus miles. Back when Chase Sapphire had their 3x first Fridays dining bonus, I’d ask our venue to charge our deposits on that day only. We got enough miles from 2 years of wedding planning for all our flights to two countries in Asia, and I upgraded us to business class for the long-haul there.

    In the US, there’s so many perks to credit card offers. The rare time I’m late on a payment (this happened when I was preggo, I had total preggo brain), I just called the cc company and they took the late charge off because I’ve always been on time!

    Admittedly, this does take some planning. NOt as much as people think, but it requires some. These days, we’re short on vacation days and spend a lot of brain space chasing a toddler, so we’re no longer going after cc bonuses. We do need to go over our cc and get rid of a few we no longer need that have annual fees. But still, we put our purchases on our cards and pay them off, since we still get miles/points for those, and someday, kiddo will be a better traveler and I’d like to have a bank of miles ready for when he’s ready for a long-haul flight. Why spend $2k on a flight for one person when you can use miles, especially when you need that 2k for daycare?

    Until then, I’ll read your blog and live vicariously through your travel hacking. Awesome post, as always!

    • Yeah, I feel like there are a TON of misconceptions about credit cards, and that’s part of the reason why I wanted to write this. I also think there are divisive opinions about them, too. I’m solidly in the ‘credit cards are great if you use them responsibly’ camp, but many others are of the Dave Ramsey school of thought. He basically tells people to cut up their cards and never use them because they make you overspend. Of course, this simple, extreme, message resonates with people. And for many people in debt, this is absolutely the right thing to do at first.

      I basically charged most of my wedding on my credit card, too! But the thing is, I have the savings already set aside to pay the bills off immediately. Hacking your wedding for points, IMO, is one of the savviest moves you can make. There’s almost never a time you’ll be spending that much money ever again. And asking the vendor to charge on certain days is absolutely GENIUS. Nice job on the biz-class seats to Asia. Long-haul flights are always worth the points.

      And yes, there’s definitely some meticulous planning involved with complicated hacks, and there are always more important things to deal with, like kiddos! But hopefully you can charge the daycare costs to your credit card!

  • Re: scam artist argument. Let’s just say I prefer to live in the real world. I could sit here and call people names, or I can figure out a way to get things for myself. Hmm, tough call.

  • MissPiggy @TheEarnestAddiction

    I was one of those fearful people who thought credit cards are only for the irresponsible, however, since reading more into personal finance I’ve hopped on board with getting a credit card for points. The key point is having a high degree of personal discipline, because it can get out of hand very quickly. Once you have that down, the points are to be taken advantage of!

    xx Miss Piggy
    https://theearnestaddiction.wordpress.com/

    • Yeah, I definitely agree it’s a multi-step process. For people who overspend, I think a cash-only diet is good to change habits. Then they can gradually switch over to credit cards and pay their bills on time. And then using credit cards for rewards is the advanced level!

      Welcome to the rewards club 🙂

  • Pia

    I keep getting told that I need to cut up my cards, cancel my accounts and live a cash only diet. But I haven’t, because I pay off my credit card to the max every cycle and I don’t see a point in turning up my nose at free points. Points can lead to many things including free flights – wouldn’t that actually make sense from a frugal / finance point of view anyways?

    But I guess if one has no discipline and cannot train oneself to have any, then it would be better to be without. Hm!

    • I agree with you. Frugality is about maximizing value!

      Good for you for not listening to people and making the decision you think is best for you.

  • I love my credit card! I only have one but I’ve recently started using it for essentials, to max out my rewards. I’m going to buy groceries anyway (and I have the money for it), so why wouldn’t I take advantage of my cash back options? I know a lot of people who live cash-only, but having cash in my wallet seriously stresses me out. I can think track it the same way I can track debit or credit. Now, I probably won’t ever have more than one card, but it’s one that works for me!

    • I’m one of those people who NEVER carries cash. Some ppl don’t feel secure unless they have cash in their wallet. If I need money I can just pop into a nearby ATM and grab $ with no ATM fees. No big deal, really. If I’m out with friends and we split a bill, I just Venmo them the $ with the app.

      With that said, my SO overcompensates for my not carrying any cash. When I go through our expenses there are so many of his $20-$60 ATM withdrawals that are completely unaccounted for. It drives me nuts! Yet another reason why I charge everything to my credit card. I don’t want to manually track my expenses.

      There’s something nice about the simplicity of just the one card! I’ve got several to track so unless you have a system going on, it’s easy to get disorganized.

  • BrooklynBread

    Yes! Ever since I got out of debt, I have been using my Chase Freedom card for everything. I pay it twice a month, when I get paid, and is like a miracle. I had like $700 to cash in for Christmas shopping last year. Just goes to show how most people need to re-think their relationship with credit and how much money credit card companies make off of people and their debt. People who come out ahead with rewards must be like .00000001% of credit card holders. I make more money from my credit card than I do from my savings account!

    • Yeah, I always consider credit card rewards as like, Advanced Personal Finance. But yes, agree, there are so many myths and fears that go along with credit cards. It’s crazy.

      The 5% rotating categories on the Freedom card are great! I only ever use it for the categories and I still earn tons of points.

  • Credit cards are my best friends too!!! We got like 9 of them now and that’s consider low for us. Last year we had 11 active, so what? I’m still frugal and they’re just plastic (the fancy ones have metal in them now…which raises the questions at the airport…)

    I know this girl who is all her credit cards because they put her 12K in debt. NO they didn’t, YOU did. She’s cutting them up and cancelling it all, even her oldest credit card. She was told doing that is really bad for her credit and she said “credit cards are evil” like a brain washed Ramsey zombie.

    • Ha, yeah, my SO and I both have the Chase Reserve (the metal one) and it def has some scanning probs.

      I would have lost my mind at that girl. LOL at Ramsey zombies. They’re everywhere! Nah, I totally get it. Some people do need to resort to extreme behaviors to avoid debt. I wish it didn’t have to be that way.

  • Father With Cents

    Credit cards are great to have which is why I don’t carry cash as much. Plus paying it in full, enjoying the rewards(the cash back one is my favorite) and checking your balances will make having one a definite friend to have.

    • I agree with you–you can gain so much if you use manage them correctly! Thanks for stopping by!

  • I always get jealous when I read an American blogger write about their credit card hacks. You guys have so many options and way better signup bonuses. Up here in Canada, our choices are quite limited.

    Chase is even slowly pulling out of the Canadian market and taking some of the better cards with them =(

    • And I always get jealous about Canadians and their healthcare!

      I hear you, though. Us Americans are lucky to have so many of these options, so that’s why it’s make me sad when people are so afraid of credit cards. Think of the disadvantaged kids in other countries!

      Ugh, Chase, stop.

  • Hey there!

    Thanks for stopping by. I actually listed all the credit cards I use in this post here:
    http://www.theluxestrategist.com/financial-map-exactly-manage-money/

    For someone who’s just starting out, it depends on what you’re looking to do, but I’m always interested in earning rewards points for travel. My recommendations:

    Chase Sapphire Preferred – $95 annual fee waived the first year – Good for travel points
    Chase Freedom – No annual fee – Good for first-timers, and can earn cash back
    Citi Double Cash – No annual fee – Very simple, 2% cash back

    I hope that helps! If not, feel free to ask more questions.