Credit Card Tips

Surely everyone knows the dangers of credit cards by now. You build up high balances, you can't pay them off, you go into eternal debt and have people calling you 24 hours a day. It's really easy to get trapped by the lure of easy money.

They key here is to PAY IT OFF EACH MONTH. Never buy anything that you cannot afford. If you can't afford it, then do not buy it. There is always another option. Sometimes the option is hard, but you can't look at a credit card as giving you "free money". It's not free. It is very dangerous.

Now, that all being said, I have four credit cards and I have them all set to auto pay out of my bank account. None of them have fees. So they are not "costing me anything". On the other hand, all of them give me rewards - so I run all of my expenses through them. It's just like writing checks - they get paid off at the end of the month with no interest. However all of those "charges" earn me free airline tickets, free bonuses, etc.

If you're going to pay bills anyway, make sure your money is working for you. Find a way that every dollar that you pay on a bill is earning you some sort of bonus in return. I have every single household bill - oil to heat the house, cell phone, house phone, cable bill, etc. - going through a reward card to auto pay. The added benefit is I never have to worry about paying the bills on time. They all auto pay when they should be.

Here are the cards I use, and the benefits.

American Express Blue
This card has NO fee, I just called to verify that. In fact I actually called to cancel because I thought it had a fee and they said it didn't and that they'd give me 1,000 extra points for not canceling! What a deal! You get 1 point per dollar here. You can spend 2,500 points on a $25 gift card. That's the smallest increment they do. They have cards for Home Depot, PF Chang's, the Longhorn Steakhouse, and other locations. So these can get you a nice dinner out or some home improvement gear. They ship the cards very promptly. I love this card but there are places that won't take American Express.

Benefit: 1 cent per dollar

Chase Rewards
Again, this card has NO fee. I use this for all my business purchases. Again, it's paid off every month so it costs no money and it earns me a ton of rewards. The key is to search wisely in their system. You can get:
* $5 card for 1,000 points (1/2 cents per dollar)
* $10 card for 1,500 points (2/3 cents per dollar)
* $25 card for 3,000 points (4/5 cents per dollar)
* $50 card for 5,000 points (1 cent per dollar)
* $100 card for 10,000 points (1 cent per dollar)
The $50 card is the best value and equivalent to American Express. They have Staples, Sports Authority, Outback, PetSmart, Chili's, iTunes, Olive Garden, and much more. A good selection here. The only better deal in here is the $200 Carnival Cruise Lines gift certificate for "only" 18,500 points (1.1 cents per dollar)

Capital One
I have mixed feelings about Capital One. It may sound silly, but I *love* the ladybug image on my credit card. It makes me very happy to use it. However, I hate the bad service I get from them! Even though my other cards have extremely high limits, this one has a tiny limit and they say they can't adjust the limit. So I accidentally go over the limit fairly often which is a $39 fee. Which is outrageous. It's a free card (which is why I have it) but this limit problem keeps hitting me. I asked them to autopay the entire amount every month, but they only autopay the previous balance which, being a month behind, could be far less than the current balance. When I call they claim they can pay the current balance if I fill out a form - then they send me a form that only lets me pay the previous balance. Their tech support all appears to be out of India and just can't speak English well.

LOL well I just called and it turns out somehow they did NOT have me on a rewards card deal! I applied for their rewards card which offers 2 points per dollar at gas, grocery and drug stores, and 1 point per dollar on other purchases. They even gave me a higher credit limit (finally). I'll need to update this report when I get access to the rewards area.

USAir / Juniper
I love to travel so I always have one card that earns airline miles. You earn a half point per dollar. With their "partners" you earn 1 point per dollar. When you then redeem your miles, you spend 25,000 points on "mileage saver" which are inter-US and rarely available. It's more likely you pay 50,000 points for a flight. To go first class it's mileage-saver 50,000 points, and standard 100,000 points. What this means is for most people it'll take several years to earn up enough enough points for a flight. Still, a free flight anywhere in the US every few years is a nice thing!

Let's say a flight from New York to LA would cost $500 (to have round numbers) and you pay 50,000 points for it. You're getting a half cent per dollar in final benefit. So you'd do better "saving money" with the other point systems that are 1 cent per dollar and use those cards on things you 100% need (staples, petsmart etc). If you use the cards on necessities and put the money you save into a travel fund you'll do well. If you get the other cards and spend them on frivolous dinners out, then you're not helping your budget any.

On the other hand, if you manage to get a 25,000 point seat (there are only a few on each flight) then you did get your 1 point per dollar rate, and are doing well.

We used miles saved up for MANY years to go to Hawaii first class, which at Mileage Saver rates for "off peak" (1/15 to 2/28) is 60,000 points per person. An alternate option is to use the miles to upgrade at 17,500 for one-way upgrades to Hawaii.

Frugal Living Tips