In Support of Credit Card Points, With Caveats

My husband and I put almost all of our expenses on our Costco American Express card. Dinner, groceries, gas, travel—it all goes on the card. And then once a month, I use money from our joint checking account to pay the bill in full. Sometimes we’ve had an expensive month: We’ve been doing a lot of traveling lately, and we’re preparing for a cross-country move, so our credit card bills have been much higher than usual lately. When that happens, I figure out how much more money we need, and we each transfer that amount from our individual accounts to the joint one (we have a standard amount we put in the account each month that covers normal expenses, so the extra transfers only happen when we buy something big, like furniture or plane tickets).

This works for us because we don’t live paycheck-to-paycheck. I would never recommend making heavy use of credit if you’re coming up lean at the end of every month. But we do have enough that we could pay off last month’s credit card bill and pay for this month’s spending. So always being one month behind in paying for things, so to speak, isn’t something that worries me. Besides, when I calculate how much money we have, I always subtract the current credit card balance from whatever’s in savings. I’m very aware of the fact that at any given point in the month, our checking balance isn’t accurate until I account for what our credit card bill will be.

I like this system for a number of reasons. I’m pretty good at managing our finances (and am much more temperamentally suited to the task than my husband), but I’m not one of those people who can track the minutiae of spending with sub-categorized budgets and spreadsheets. My overall philosophy is to make sure there’s more money coming in than going out and to ask myself hard questions about most of my purchases: Do I really need this? Is it really worth eating out twice in one week? Can I wait a few days and see if I still want this? The monthly credit card bill is how I keep an eye on our overall spending. I know how much it usually is, and when it’s higher than normal, I can look over the statement and figure out if we need to cut back.

My credit cards are also the only things that appear on my credit history (I have a personal credit card in addition to the one I share with my husband—I put expenses like shoes and clothes on that one). I bought my car in cash and I don’t have any student debt, so all a credit check turns up is a long list of paid-in-full-and-on-time credit card payments. Sure, there are other ways to build credit, but I’m lazy, and this is the easiest.

And then there are the rewards. Our American Express gives us 3 percent cash back on gas and travel, 2 percent back on some things I don’t remember, and 1 percent on everything else. My Chase card has similar, though less generous, rewards. Once a year, we get a check in the mail and go down to Costco to cash it (and to buy rice and flour in bulk as part of our preparations for the zombie apocalypse). This year, the check was about $250. Not an earth-shattering amount, but it paid for our Costco purchases and a couple of nice dinners out. My Chase card actually lets me apply the cash back directly to my bill, which means that rather than thinking of that money as a reward, I just think of it as “income”.

I’ve been paying for things with credit cards for at least a decade. Though I can understand how some people would experience credit as free money, I tend to fall into the other category, and it often feels like I’m paying for things twice: Once when I make the decision to buy something (often after debating over whether or not I really need it), and then again when I pay the bill at the end of the month. Credit cards, in other words, don’t make me any more inclined to impulse purchases or over-spending.

There are a lot of good reasons to avoid relying on credit, but there are also reasons to take advantage of it, with caveats: If you have a comfortable emergency fund and save more than you spend, if you usually aren’t tempted into impulse spending, if you will remember to pay your bill every month, and if your expenses are high enough to make the rewards worthwhile. If a credit card company wants to pay me for living within my means and paying my bills on time—something I’m going to do anyway—I don’t see why I shouldn’t take their money. They’d be all too happy to take mine.

 

Previously: How to Stop Going into Credit Card Debt for the Sake of “Points”

See More: Stories by Sydney

Sydney Bufkin lives in Austin and tries not to let her dissertation take over her life. Sometimes she even finds time to write about other things. Photo: Portal Abras

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23 Comments / Post A Comment

Using a credit card definitely feels to me like I’m spending the money twice. To counter that, the way I use my credit card is that when I spend money with it (usually because a place doesn’t take debit), I move that amount of money from my chequing account to savings, so I’ve already accounted for it in my budget. And like you, my spreadsheet that tracks how much money I have has a debit column, visa column, and then debit – visa column which is what I actually have to work with.

loren smith (#2,300)

“If a credit card company wants to pay me for living within my means and paying my bills on time—something I’m going to do anyway—I don’t see why I shouldn’t take their money. They’d be all too happy to take mine.”
This is so awesome. I put everything on my cash back credit card and pay the balance in full whenever I sit down in front of my computer. I have never once paid interest on the card and it feels great – I struggled with using a credit card a lot when I was younger, and racked up about $4k in debt, but there is a way to use them responsibly. My primary card was comprised online last week and I’ve had to use my stupid pointless back up and it’s killing me.

BornSecular (#2,245)

Are you me? Seriously. I am unusual in how I feel about cash as well: for me, it doesn’t seem real to spend it. I see it as already having left my (real) checking account, so it doesn’t impact it more by spending it.

This actually makes me feel like I should be putting more on my credit card to maximize my rewards. I am afraid of debt so I don’t currently do it. Also my husband is the exact opposite and cannot control his spending if he has access to credit cards and we were burnt last year by that. Now I am the only one with a card and I handle all the bills, so I could probably do this responsibly.

OhMarie (#299)

@BornSecular I am the same way! My husband and I share a fidelity credit card that gives us 2% cashback on everything into a Roth IRA. It’s great.

calamity (#2,577)

@BornSecular Yeah, this is me. For whatever reason, the numbers I see on a computer screen are way more real to me than actual dollar bills. Once it’s out of the account, I am GOING to spend it; the only question is on what.

limenotapple (#1,748)

I don’t really like using my debit card, because in the last 6 months my credit card account was compromised a few different times (one was a local grocery store who has their whole processing system hacked and everyone who used a credit or debit card at the store had their account compromised). If my credit card is unusable until the fraud is figured out, I can live with that. If it’s my checking account, well, that’s a much larger problem.

I guess the other thing to keep in mind is that it could impact your credit score to use your credit card for everything the way I do. If it eats up most of your available credit to do this, that could be a problem. My limit is high enough that I don’t worry about it too much.

hellonheels (#1,407)

@limenotapple @limenotapple As long as you’re paying the card off in full every month like they are, though, it shouldn’t ding your credit score. That only happens if you carry over a balance that’s a high percentage of your total credit.

limenotapple (#1,748)

@hellonheels Isn’t part of your score the percent of total available credit you are using? Is that dependent on it being overdue? Because the last time I pulled my credit report and score, the available credit part was low because we charged a bathroom remodel (in order to get the cash back) but it wasn’t overdue. It was actually just an up to date count of what our balance was at that moment. The finance guy I was talking to said this can impact the score, but I can’t verify that he knows what he’s talking about.

hellonheels (#1,407)

@limenotapple Huh. I take that back. You are actually right! Gold star for you.

limenotapple (#1,748)

@hellonheels This is the only gold star I’m getting this week. When I was trying to read more about it, it made me see how arbitrary these rules are. The FICO website was almost laughable. Use some credit! But not too much! Have some credit! But not too much! Have a installment plan! But not THAT installment plan! It’s a shame this counts for so much of our lives.

Good points, all.

BUT: “2 percent back on some things I don’t remember”
You are writing an article on finance for a blog and you couldn’t take five minutes to check on this??? Poor journalism.

readyornot (#816)

@Jake Reinhardt If it’s the CostCo TrueEarnings card, then it’s 3% on gasoline and 2% on travel and restaurants.

As for not doing research, I think the general vibe of this piece was, I don’t worry about it too much. Also, it’s not an ad. So it doesn’t bother me! If you are interested in using this credit card, perhaps you could look it up at nerdwallet.

@readyornot I’m not interested in it at all, but if you’re writing a piece on it, I feel like it’s pretty easy info to find, rather than not remembering.

megadith (#273)

My husband and I do the same with our Costco Amex. Love it. Because we moved across the country last year and he puts all his business travel on it, our cash-back check this year was $1,100! I pay it off several times a month and we never pay interest, so I consider that entirely free money.

This article is brilliant. Thank you for it.

The Mole (#2,633)

Appreciate this post – very much needed as a counter to all the ‘credit cards are evil’ thoughts that pervade around here. If you use credit responsibly (i.e. tend to pay in full all the time), some cards will actually pay you for using them, like the Amex Blue Cash card I rely upon. I probably get around $500 in cash back per year because I use that for virtually all bills & spending (minus rent). Well worth it if you manage the debt appropriately.

BornSecular (#2,245)

@The Mole As noted above, I too liked this post. I guess the problem is that people like this must be the exception, not the norm, or these companies wouldn’t have these programs. They are in business to make money somewhere I suppose.

franklina (#3,924)

@The Mole YES (I didn’t see your comment before I posted very similar sentiment below).

franklina (#3,924)

Thanks for this post. It’s refreshing to read the perspective of someone who is effectively managing her money and credit – I’ve felt like this site has started to skew towards “we are all broke and in debt and have no hope like all other young people.” While that’s important to discuss, it’s great to hear from people who manage their money effectively. Not only does this resonate more with me, it sets a more balanced tone and presents a positive example.

I’ve used credit cards for 90% of my spending since college, but I don’t think of it as “credit” or “free money” – I plan to pay my balance off in full every month so I visualize credit card spending coming directly out of my savings account.

Yes, this sounds like using a debit card, but credit cards are a better option if you’re going to pay it all off every month: a.) rewards points, and b.) additional consumer protections that aren’t possible when the money directly leaves your checking account upon transaction.

calamity (#2,577)

I’ve only had a credit card for a year and a half and have no other credit history, and they won’t approve me for any more than $750. I have it set up to be due the day after my midmonth (aka, non-rent) paycheck goes through, and since that’s more than $750, I can always pay it on time.

Unfortunately since I had no credit history it’s one of those blanket 1% cash back deals. I wish I could get something with tiered rewards for groceries or restaurants, but I applied for an Amazon card a couple months ago and they rejected me, so … once spurned, twice shy, or whatever. (And STILL every time I place an order on Amazon they try to sell their card to me. What is the point of advertising things you won’t follow through on???)

EM (#1,012)

@calamity Have you called them and asked for it to be increased? I used to have a $1000 limit on mine and then I wanted it increased before a big international trip and they upped it to $4000. You could also lieeee about your annual income if you wanted a bigger limit (but maybe don’t do that?)

hellonheels (#1,407)

This is very similar to my strategy. Apart from the $200 cash I budget per week for my general living expenses, everything goes on my AmEx Blue, which shares a Membership Rewards account with my corporate card. It’s not a cash back card, which is by design: I find that exchanging points for gift cards to stores I shop at anyway results in a much better value than the amount of cash I would get back on a different card. Between the two accounts I earn enough points to get about $500 in gift cards per year.

moreteawesley (#545)

I wish I could use credit cards this way. Unfortunately I do live paycheck-to-paychek, though, so even though I only ever had a card with a $500 limit, I paid interest on the damn thing every single month until I finally paid it off, cancelled the card, and cut it up. Until I have more income it’s just too tempting to over-spend.

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