*Warning: Try this ONLY if you have good self control with credit cards. As a matter of fact, count how many times I refer to self control in this article.
Ok, so you’ve paid off all your credit card debt with the instructions in Pay Off Those Credit Cards! and now you’re not sure how your money can work for you. Is your credit better? Do you have AWESOME self control now? If you answered no to either of these questions, then leave now and DO NOT finish reading this post. If you answered yes to both questions, then read on.
Let’s talk about debit cards. Debit cards are distributed by banks and allow you access to your money via ATM machines, usually with no charge at machines on your network, and double-charged by your bank and other banks at off-network ATMs. They also allow you to complete purchases at point-of-sale locations like grocery stores, department stores and gas stations, etc. What they don’t do is make you any money or earn you any rewards.
Now, let’s discuss credit cards. I know, if you just got out of serious debt, credit cards are the last thing you want to talk about. And if you’re not comfortable, stick with debit cards. But if you have good self control and can pay your balance in full before the end of the month, you can get more mileage out of your credit cards while improving your credit score and take advantage of rewards cards perks as well. Here’s how. Again, please only try this if you have really good self control.
5 Steps to Get More Mileage out of your Reward Credit Card
- Pick a Card – Pick one credit card with a limit high enough to cover your monthly expenses. I recommend choosing a card with either a large cash back reward or airline miles rewards you will actually use. Without the rewards, the only benefit to this method is a healthier credit score really. Might not be worth the risk. I don’t recommend choosing gift card or restaurant card rewards, because those can be lost or stolen, and don’t really provide a big benefit like cash back or travel.
- Charge Your Monthly Expenses – Instead of reaching for your debit card to pay your regular expenses, use your chosen credit card.
- Charge the Bills You Can – Instead of using your debit card or writing a check each month to cover utility and other monthly bills, use your chosen credit card. Note that some bills (like credit card bills) cannot be paid with a credit card. This is to help save us from ourselves, and many people need that. And, according to LaToya Irby from About.com, you shouldn’t charge monthly bills. Usually I agree. But for this program, as long as you have stellar self-control, I disagree.
- Pay Off The Chosen Credit Card Every Payday – That’s right. Every single time you get paid, immediately pay the entire balance on that credit card. See why it requires such self control? Again, I only recommend this if you are sure you can commit and will not get yourself in debt.
- Cash In Rewards – Now, just cash in your rewards. For cash back, I recommend you redeem as soon as you are able to ensure you don’t lose them. For airline miles, save them until you have enough to pay for one or more tickets. It’s possible to gain enough points to pay for a round trip for 4 in one year if you’re dilligent about this. I know. I did it!
I can’t stress enough that the balance on the card needs to be paid in full every payday. This really is the best way to ensure that you’re not over budget. And look at your credit card statement before you check the balance in your checking account. That way, you can’t be fooled into thinking you have more money than you do. Remember, only try this if you fully trust yourself to pay your card off every payday. Bon Voyage!