Credit Cards: Are They Working For You or Against You?

Matt Ryan is a guest contributor to the blog. He as a dual major in both Finance and Accounting. His background started in doing taxes and company audits for businesses and worked for a firm. Matt is now working in the private sector in charge of finances for 2 companies, 10 divisions, and managing 9 figures in revenue. Matt has a passion for helping others manage and get their finances on track. Matt will share his blog posts regularly and is always open for questions. So please don’t hesitate to leave a comment and Matt will be happy to answer.



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I write this post as I sit in a coffee shop out of town on a vacation. The beautiful part, the vacation is mostly covered by credit card reward points. From personal experience, many people I have come across associate credit cards with debt or evil. I know that is extreme but even those that follow the likes of Dave Ramsey have been told credit cards lead you to trouble. Well I’m here to talk about my experiences with credit cards and how they have actually helped me save money.




Let me start by saying my first experience with credit cards was awful. I opened my first credit card at the age of 19. I had no real idea of how credit cards could impact my personal financial standing. My first credit card came with a measly $1,000 credit limit. To a 19 year-old, that’s $1,000 in essentially free money. The thought of paying it back or understanding there were consequences regarding my credit card usage was out the window. Needless to say, I ended up having my account sent to collections and kickstarted a long and painful process of learning a valuable life lesson in credit and debt. Some of you are aware of the painful process that comes with defaulting on debt (or haven’t had the experience which is awesome) so I’ll skip the painful process of recovering from my blunder and skip ahead to how credit cards can actually carry a lot of value.





The first card I signed up for was the Capital One Venture card. It came with a 50,000 point bonus. Most credit cards or loyalty programs run a conversion of 100 points equal to $1. So, my credit card came with what was essentially a $500 sign up bonus (and yes you have to hit a limited spend requirement in order to obtain the points). I always thought this was too good to be true. Why would a credit give me $500 in bonuses? Well, credit card companies are banking on the vast majority of their customers to run up account balances and slowly pay them off accruing insane amounts of interest. But, the small percentage of people who use credit cards responsibly can attest that yes, you will receive large amounts of bonus money and not pay any extra interest on their purchases. So, while I talk about “free money”, it does require discipline. This discipline includes paying off your credit card balance IN FULL every single month. This is where your mind set needs to shift when it comes to using credit cards.




I personally treat my credit card like my debit card. I don’t spend money that I don’t have. But if you can use your credit card for all of your purchases (instead of using your debit card) and pay off the balance every month (which shouldn’t be hard since you should be able to cover all the expenses from your bank account not having spent that money using the debit card), you’ll start to accrue the “free money”.

So, let’s dive deeper into my personal scenario. After I signed up for the Venture credit card, I had to spend $3,000 in three months in order to claim my 50,000 bonus points. $3,000 on a credit card sure seems like a lot, but if you treat it like your debit card it’s a lot easier to cover that initial required spend. Things I did to help this along was pay for all of my groceries, insurance bills, any monthly memberships/recurring charges, and gas all on my credit card. Literally any expense you can move from your debit card to your credit card will help you reach that required spend without having to reach and spend the money you don’t necessarily have. It’s even easier if you have a large expense you know you have coming in the time ahead.




The other interesting thing was that not only was I obtaining my bonus points, but I was racking up extra points from using the credit card. So, by the time I actually reached my $3,000 spend requirement, I had accumulated an extra 8,000 points. Most credit cards will offer a multiplier to your points based on certain purchases hence why I had more than 3,000 extra points when I hit my minimum spend requirement. These points can be used for a myriad of options.


Capital One lets me reimburse money charged on the card for points though sometimes the value of your points will vary depending on how you choose to spend them. I was choosing to save up the miles for free flights. It was so easy to do, I just logged into my account, picked a flight and the points were deducted straight from my credit card point bank. There were no extra fees and I flew Delta. Delta was able to tie the purchase to my account after I entered in a link code sent via email so my flight information was readily available through the Delta app. My round trip flight cost me $400 but I didn’t have to pay money. It was such a cool feeling the first time you’re able to purchase something with free credit card money.




There are a ton of credit card reward options out there if saving for a flight isn’t your thing. Cash back and generic rewards are offered through most major credit card companies. My suggestion to you if to start taking advantage of these offers. Even if there is a yearly fee of let’s say $95 (seems most common), all I’d have to do is spend $4,750 of my credit card in a calendar year to offset that cost (my card is 2x points on all purchases which is why I said $4,750). And if you are able to responsibly spend your budget using a credit card, you should have no problem earning more points than that. Let’s just say the you spend $20,000 a year on your budget. With the venture card, that would amount to 40,000 points at a minimum which is $400 you can spend on other purchases. It’s such a simple way to save/earn money, you don’t even have to spend hours researching how to come out ahead. The math is simple. So, stick to your budget, but change the way you transact and you might finally be able to safely afford that vacation that just seemed a little too spendy.




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Top 4 Credit Cards Travel Rewards Programs we have found. Most of the top cards require a good to excellent credit rating. Make sure you check offering on each card for most current updated perks.


1. Chase Sapphire: Earn 1-5x rewards. Currently giving 5x rewards for using Lyft through March of 2022. Annual fee of 95.00 per year. Can earn 80,000 bonus miles as intro offer if you spend $4,000 in the first 3 months.

2. Capitol One Venture Card: 2x the miles earned. $95 annual fee. 100,000 bonus miles if you spend 20,000 in the first year or 50,000 bonus miles if you spend 3,000 in the first 3 months

3. Bank of America Travel Rewards Card: No annual fee. No additional miles bonus but 0% interest for the first 12 months. Earn 1.5 points for every 1.00 spent.

4. Discover It: No annual fee. Earn 1.5 miles per 1.00 spent. 25,000 bonus miles if you spend 1000.00 in first 90 days. That is equivalent to a $250.00 credit towards travel expenses.

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Thanks for stopping by,

Pam




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