Let’s be honest, there are a lot of opinions out there about the wisdom in credit cards. My goal here is not to give you expert advice, but instead to share what we have personally experienced when utilizing credit cards wisely.
Maybe you’ve followed Dave Ramsey by shunning all credit card usage. Or maybe you have never used a credit card because you’re scared of the potential risks. Wherever you stand on credit cards, this post can shed some light on the wisdom in credit cards.
Opening and utilizing the right credit cards helped us go on a six-month road trip and learn how to travel for cheap. Now we typically open a couple credit cards each year to acquire points, earn free cashback, and travel the world on a dime.
Use credit cards the right way
I want to begin with a caution. There is a reason Dave Ramsey will tell you to never own a credit card. Lots of people fail to use credit cards the right way. If opening a credit card is will lead you into debt, DO NOT DO IT. Credit card hacking is a unique way to earn free money, and it can quickly become a sticky situation. I do believe, however, that it is possible to use a credit card the right way. If you’re interested in learning more, let’s start by focusing on how to use a credit card.
The best use of your credit card is whenever you can use it, use it! There are certain things you cannot pay with a credit card (mortgage, electric bill, certain grocery stores, etc.). But for everything else I would highly recommend using a credit card over a debit card. To put it simply, the more you spend, the more you earn. The most important thing is paying off your credit card monthly. Never, and I mean NEVER, let the credit card companies get you with the outrageous interest fees. We personally pay off each credit card weekly, but as long as you pay off each credit card in full every month, you’re doing it right.
To use credit cards the right way, you just need to decide if paying it off weekly, bi-weekly, or monthly works best for you and stick to the plan.
Why You Should Use a Credit Card
The main reason why you should use a credit card is to earn money back with every purchase. This is called earning cash back. It could be 1% or 5%, but either way there is always something coming back to you. Your regular spending will definitely earn you points or cashback, but the real money maker is the sign-up bonuses. Almost every credit card has a sign-up bonus that is relatively easy to achieve with your normal spending.
For example, a sign-up bonus may be “earn $200 when you spend $500 in the first 3 months.” Or “earn 60,000 points when you spend $3,000 in the first 3 months.” If you just put your normal spending on the credit card for three months straight, bonuses are pretty easy to hit.
Since bonuses are where you make the most money, feel free to open a new credit card just to get the bonus reward. You can find people who will tell you to open 10+ credit cards a year to get all the bonuses you can. That’s a little extreme. To start I would recommend finding one card with a good sign-up bonus. Once you hit the bonus, you could consider getting another card. Or just earn with the original card for awhile. I would say 2-4 new credit cards a year is much more realistic and can still help you earn a lot of money in bonuses.
Finding Your Next Credit Card
Finding a credit card can be daunting with so many options out there. Focus on sign-up bonus, annual fees, and cashback percentage. When looking at the sign-up bonus you need to ask yourself if you’d benefit more from flying points, hotel points, or straight cash. Once you find the sign-up bonus that fits you best make sure you can spend the amount needed, without spending more than normal.
Also, consider the annual fee. To start, I would recommend finding a card that has no annual fee. After you are comfortable using credit cards wisely you can consider getting a card that has an annual fee. Most sign-up bonuses will pay you back more than the annual fee, which makes the fee worth it.
Finally, consider the cashback percentage. Look to see if the card has specific categories that pay you back more that you could really utilize. For example, look for categories like gas, groceries, travel, etc…
If you are looking for a card to start out with check out the cards we have personally used and loved!
Bonus Tip
One of the best tips to maximize your earnings with credit cards is to not add your spouse as an authorized user. The reason for this is so you can refer them to the card to get the referral bonus AND the sign-up bonus again. This is the absolute best way to get the most bang for your buck!
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