Are credit cards evil?
Many have complicated relationships with their cards. They entice us with their wiles, allowing us to buy whatever we want right now without worrying about whether we can afford it or not, then proceed to suck us dry with ever-rising interest rates.
Of course, it’s not the credit card itself that’s the problem. They’re just plastic.
It’s our relationship with credit and money in general that can lead us into a neverending cycle of debt.
Credit Cards for Rewards Points
Credit cards can be our friends if we use them right.
We have to learn to play the game. We can leverage credit card rewards points to score incredible deals when we do.
We can leverage credit card rewards points to get great deals!
I once paid a little over five dollars for $400 worth of merchandise at Best Buy. I bought a camera, memory card, gaming controller, and Bluetooth speaker, paying less than the price of a bag of chips.
The secret: leveraging rewards points.
How Do Credit Card Rewards Points Work?
Credit card companies want your business and will pay to get it. Many offer tons of goodies to customers, mainly in the form of reward points.
They’ll give you “points” for each dollar you spend using their card. You can exchange those points for goods and services, which vary greatly depending on the care.
Some cards offer cashback, while others allow you to buy gift cards. Travel-focused cards partner with big travel companies to provide deals on flights and hotels. Some even let you book your trip directly with the card company using your points.
How Do Credit Card Companies Benefit?
You’d think credit card companies would go under offering so many freebies, but they usually make far more than they spend.
They understand human nature. They know that the vast majority of customers will spend freely to earn points, pay the minimum payment each month, and pay thousands of extra dollars in interest over the years. That interest more than makes up for the value of the points.
How To Leverage Rewards Points While Avoiding the Interest Trap
You don’t have to pay by their rules.
Follow two simple rules to leverage reward points for your benefit: don’t buy stuff you don’t need, and pay off your credit card balance in full every month.
Rule 1: Don’t Buy Stuff You Don’t Need
Many credit card companies offer fantastic bonuses for spending big on your card within the first month.
If you spend enough money, you can get twenty thousand bonus points!
The enticing offer makes many people overspend, charging for things they don’t need to earn all the points.
Instead, don’t open a new card until you have a big purchase in the wings. Put the money you need for the purchase aside in your sinking funds account, and then open the credit card account you’ve been eyeing that offers epic rewards.
Make your big purchase with the card, and pay it off with your sinking fund at the end of the month.
Rule 2: Pay Off Your Credit Card in Full Each Month
Credit card companies make millions of dollars in interest. They charge 20-30% on every purchase – if you hold a balance.
To avoid paying thousands of dollars extra for every item you purchase, pay your credit card in full each month.
If you make a big purchase on your credit card, ensure you have the cash to pay it off. You can’t afford the item if you don’t have the money.
Emergency Situations
A lot of people keep a credit card in case of emergencies. While an emergency fund is vastly superior, saving enough money to overcome some of life’s toughest challenges is difficult.
There’s nothing wrong with relying on a credit card if you have no other options. Consider cards that offer cash back to help you pay the bill faster.
It’s also essential to understand what’s an emergency versus what isn’t. When you need your car to get to work, a car repair is an emergency. A new television is not. Groceries to feed yourself until your next paycheck are an emergency. Dinner out at a nice restaurant is not.
Credit Cards Are Great When Used Correctly
The moral of this story is that credit cards don’t have to be evil. When used correctly, they can be advantageous. You can use the credit card rewards points to save a ton of money as long as you don’t forget the two fundamental rules:
- Don’t buy things you don’t need just to get points.
2. Pay off the credit card immediately so you don’t have to pay interest.
If you do this, you can beat the credit cards at their own game and become a winner.
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