The Smart Way to Use Credit Cards

This post is by Stephen Guise of Deep Existence.

Credit cards are one of the most misunderstood financial instruments in the world. This is a fact—one that explains why VISA and American Express are worth about $60 billion a piece.

The interest rates on credit cards are actually illegal in many states, but a supreme court ruling changed everything by allowing credit card companies to only follow the laws of their headquarter’s state. Naturally, companies moved to ever-popular states such as South Dakota and Nevada because they had lenient usury laws.

Usury laws protect consumers from excessive interest rates. Since that supreme court ruling essentially removed them for credit cards, the rates regularly exceed typical usury limits, with one card charging as much as a 79.9% APR. Still, people are jumping at the chance to build up debt with double-digit interest rate credit cards. According to the USA Debt Clock, the USA has nearly $800 billion in credit card debt at this time.

Be on the winning side for a change

I just recently received a credit card that will allow me to take between two and four domestic round trip flights in the United States, free of charge.

Okay, it isn’t completely free. There is a $95 annual fee for this particular card. Still, I can cancel the card or negotiate that fee at any time, and I still get my flying benefits. I took advantage of a British Airways promotion that gave new customers 100,000 BA Miles (50,000 on first purchase and 50,000 after spending $2,500 in the first three months).

Before this card, I got the Amazon.com credit card. The card allows me to get a $25 Amazon gift certificate for every $833 spent on Amazon and every $2,500 spent elsewhere.

You know what things I really like? Travel and Amazon.com! So far, I have received about $600 worth of Amazon money. It was completely free. I did not spend a dime on anything I would not have bought otherwise. Later this year I will be traveling somewhere exciting for petty cash (you pay taxes for flights—usually $10 domestic) because of my British Airways card.

Why you can win

Credit card companies are statistics experts. You are a statistical probability in their eyes. They will always play the odds and come out richer as a result—the same reason Vegas always wins.

The difference between credit cards and Vegas is that we have complete control over what actually happens. I can pay off my credit card every single month on time (even automatically to ensure it). I can reap all of the benefits of the card without sacrificing much at all.

How to do it

First, have a goal in mind. Do you simply want cash back? Is there a particular store you shop at all the time? Do you want to travel? By car or by plane? There are so many different types of credit cards out there that it’d take a book to cover them all. This link is a great resource for getting started with research. The types of cards are listed in the left sidebar menu.

The idea is to find something you spend a lot of your money on and find a credit card that maximizes the rewards and perks for buying that particular thing or from that particular company. There are low interest cards out there, but if you’re looking for one of those, you’re planning on being on the losing side of the deal (paying ridiculous interest—”low” is probably actually a very high 10%).

Consider bonuses

Sometimes the sign-up bonus makes it worthwhile to get the card. For example, I have limited interest in the British Airways card, but the sign-up bonus is worth more than $1,000. This initial perk would take most cards several years to reach in rewards and it is available very soon after getting the card. Another bonus of the card is that it has no international transaction fees. So if I decide to use my miles to go to Fiji, I can use the card there without the typically exorbitant fees.

Most importantly…

Pay the card off on time. Every time.

It is literally insane to pay 10+% interest on something. Give me guaranteed 10+% interest on my investments and I’ll be rich when I’m older. Pay 10+% interest on money you don’t have and you’ll be swamped in debt in no time. You can thank compound interest for this.

Final advice

Make sure you understand the fees and conditions of the card you get. Don’t look at 12 months 0% APR and be surprised when it jumps up to 20% APR after that. I don’t pay attention to the APR because I’m not interested in paying these companies for no reason. Some great cards, like my BA card, have annual fees that are still worth it. Others have annual fees that the card does not justify.

I recommend doing as I do and “filtering” all of your purchases through your carefully selected credit card. Not only will this practice rack up some serious rewards and perks, but you’ll be building your credit score by showing you’re responsible with debt (which allows you to get better offers). I know of some people who were denied this great BA card deal because their credit score was poor.

I will leave you with possibly the best advice of all: check Slickdeals and search for credit card deals. This website gathers the best deals around the web and if there is an amazing deal out there, their community will find it. Better still, you can read the comments of people who received a similar deal before.

For this BA card, I read several stories of the miles paying for flights to Egypt, Canada, and other places that would have cost thousands. You might also read negative experiences with not being able to use air miles or other red tape that credit card companies sometimes use. If you do your research, you will get a good feel of what to expect from your new card.

VISA has been playing this game for years—but you can still beat them.

Written by Stephen Guise, who has a B.S.B.A. in Finance. When Stephen was willing to fail, he started blogging at Deep Existence. Rumor: American Express is considering giving customers the option to subscribe to Deep Existence at ATM terminals because reading the content there is almost like getting free money. I fully support this idea.

About Guest Contributor

This post was written by a guest contributor to FeelGooder. Please see their details in the post above.

Check out Write for FeelGooder page for details about how YOU can share your tips with the FeelGooder community.

Comments

  1. Amy says:

    This is an interesting idea. I guess I’ve been so anti-debt that I haven’t considered the perks of certain credit cards (if, of course, you pay them off on time). You’ve got me thinking about which credit cards I might want to look into…
    And, I had no idea that Deep Existence had that deal with AmEx, although I have long suspected that Deep Existence was like free money. :)

    • :-)

      Hi Amy,

      That’s a big reason why I wrote this article. I know of many people that don’t use credit cards because they don’t like debt. I want to bring the debt-laden and the anti-debt people together towards the middle. The middle ground I speak of is still debt-free, but not to the point of never having a credit card. They are very valuable when used correctly!

      Deep Existence is no printing press – but it’s close. ;-)

  2. Rick says:

    Or better yet, pay cash. Credit card companies know if they can lure you in with these offers – a percentage will carry a balance sooner or later. Good luck!

    • But if you pay cash, you don’t get the credit card perks. If someone has a compulsive spending problem, then cash would be best. If not, then they should take advantage of the rewards!

  3. Justin says:

    Hey Stephen,
    Anything that I can get for free or at least a reduced price is alright with me. One of the reasons that I don’t fly more often is because of the price, well that and TSA, but that’s a whole different discussion.

    Anyway, thanks for the heads up about the credit cards and the reward perks that come with them.

    • My pleasure Justin. Haha, TSA has gotten pretty extreme. If you are looking for a card, Slickdeals.net is a great (trustworthy) place to find attractive offers.

  4. hello says:

    3 cheese

  5. Amazing! Its genuinely amazing piece of writing, I have got much clear idea about from
    this paragraph.

  6. Elisabeth says:

    Thanks designed for sharing such a good idea, article is good,
    thats why i have read it completely

  7. Does your site have a contact page? I’m having problems locating it but, I’d like to shoot you an e-mail.
    I’ve got some creative ideas for your blog you might be interested in hearing. Either way, great website and I look forward to seeing it develop over time.

  8. Please let me know if you’re looking for a author for your blog. You have some really good articles and I think I would be a good asset. If you ever want to take some of the load off, I’d really like to write
    some material for your blog in exchange for a
    link back to mine. Please send me an e-mail if interested.
    Many thanks!

  9. very says:

    When someone writes an article he/she retains the thought of
    a user in his/her mind that how a user can understand it.
    Therefore that’s why this article is perfect. Thanks!

  10. retro says:

    While this is a round numher that can be the stfart of a very counted few snack and sweet prepared at home.
    Children who are breastfed from young do not develop a penchant forr sweet food and drinks, determining teeth yellowing.
    Register Yoour BusinessYou musst make your business legal,
    so check for the requirements in your country, you can hae spider-man and supesrman candy theme.
    Horehound cabdy tqste iis bitter-sweet and is
    helpful in soothing itchy throat.

  11. white paper says:

    Hey! Do you use Twitter? I’d like to follow you if that would be okay.

    I’m absolutely enjoying your blog and look forward tto new updates.

  12. white paper says:

    Wow that was strange. I just wrote an really long comment but
    after I clicked submit my comment didn’t
    appear. Grrrr… well I’m nott writing all that over again.

    Regardless, just wanted to say great blog!

  13. catch says:

    When I originally left a comment I seem to have clicked the -Notify me when
    new comments are added- checkbox and now whenever a comment is added I get four emails with the exact same comment.
    Is there a means you are able to remove me from that service?
    Kudos!

  14. Emelia says:

    This is really attention-grabbing, You’re an overly professional blogger.

    I have joined your feed and stay up for in the hunt for more of your great post.
    Also, I’ve shared your website in my social networks

  15. Woah! I’m really enjoying the template/theme of this blog.
    It’s simple, yet effective. A lot of times it’s tough to get that “perfect balance” between user friendliness and appearance.
    I must say that you’ve done a great job with this.
    In addition, the blog loads super fast for me on Internet explorer.
    Superb Blog!

  16. fofuchas says:

    With havin so much content and articles do you ever run into any problems of plagorism or copyright
    infringement? My site has a lot of completely unique content I’ve either authored myself or outsourced but it looks like a lot of it is popping it up
    all over the internet without my agreement. Do you know any ways to help protect against content from being ripped off?

    I’d truly appreciate it.

  17. Linette says:

    This unique blog, “The Smart Way to Use Credit Cards”
    indicates that u actually fully understand precisely what you’re speaking about!
    I personally definitely agree. With thanks ,
    Williemae

  18. Effie says:

    Hi great blog! Does running a blog such as this take a large amount of work?
    I’ve no understanding of coding but I had been hoping to start my own blog in the near future.
    Anyway, if you have any suggestions or techniques for new blog owners please share.
    I understand this is off subject but I just wanted to ask.
    Thanks!

  19. Maximo says:

    This is a terrifying thought, especially since we in the construction industry have so many fatalities.

    External doors and windows are double glazed with. Carbon steel is therefore the ideal
    choice in standard pipe fitting applications, and also benefits from not being an
    especially expensive metal.

  20. Wow, incredible blog layout! How long have you been blogging for?

    you made blogging look easy. The overall look of your
    web site is wonderful, let alone the content!

Speak Your Mind

*