Pay with Credit Cards

Here at Pointing to Retirement, we funnel as much routine spend as possible through credit cards.  It’s the smart thing to do. However, we notice a lot of individuals don’t see things the same way as we do, so today we will make a quick case for why you should also funnel your spend through credit cards.  We’ll give you 2 reasons why you should pay with them and 1 thing to keep in mind while doing so.

Why Pay with Credit Cards?

  • Rewards – many credit cards offer hefty sign up bonuses and rewards.  Sign up bonuses routinely earn you the equivalent of $500 all the way up to $1000 just for meeting spend thresholds after you sign up.  Additionally, once you have a good credit card in your wallet, you can often earn anywhere from 1-5 points (think of this as generally $.01) per dollar spent.  The earn rate is not substantial per dollar spent, but over time, the rewards can add up as you make your way through the year handling your routine expenses.  Essentially you can look at it as an automated way for you to reward yourself for just being alive and handling your daily business.
  • Security – credit card companies often have extremely good fraud reimbursement systems.  For instance, if you have a phony charge show up on your statement, credit card companies almost always immediately reimburse you for the fraudulent amount.  Additionally, credit card companies legally can’t hold you liable for the fraudulent amount.  Alternatively, banks often take significant time to reimburse fraudulent transactions from debit cards and don’t have to reimburse you if you wait too long to report a fraudulent transaction.  Credit cards offer a blanket of security for our daily spend.

One thing to remember:

  • PAY YOUR BALANCE IN FULL EACH MONTH – the one thing that can derail you from taking full advantage of the rewards credit cards offer is not paying your balance in full each month. When you carry a balance on your credit card, the company offering you the card can and will immediately start charging you hefty interest rates (15%+ a lot of the time) on the remaining balances due.  This puts you in a bad spot of racking up tons of additional $ to be paid based on the interest rate charged.  Once you start carrying a balance on your credit card and racking up interest on the balance, you might as well toss your benefits in the trash since the interest charged will often times completely counter the rewards to be gained by the credit card rewards.  To be safe, automate your payment to pay your balance in full every month.  That way you can ensure you come out on top.

This should get you started in understanding why spending on credit cards is beneficial and what you need to keep in mind in the process.  As long as you automate your payment and pay your balance in full, you can essentially get free money from credit card companies while at the same time protecting yourself from potential fraud.

 

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