Is it really possible to make credit cards work for you?
1,000% yes, but here’s the glaring caveat: In order to be effective at it, you have to be diligent about making payments. Some people use spreadsheets, especially when it comes to maximizing reward points. Thanks to my guest contributor, I’m now going to have to dedicate an installment to explaining point valuation in the near future, but given our audience has expanded to a diverse base, it’s a subject worth exploring.
Oscar Zorilla is back with another great contribution. Before plunging into this latest installment, I would ask you to consider reading his first and second articles to get a feel for his approach to credit cards.
I place this article into the category for advanced credit card users, not because the advice is hard to understand, but because it assumes you have the discipline to take full advantage of tactics like delayed payment flexibility. I will say my only request before you follow Oscar’s advice is that you have a healthy emergency fund to offset any unforeseen expenses. Oscar is savvy on this subject, but the assumption, especially with Tip #6, is that you are good with money and won’t take out additional cards if you don’t have good discipline.
With that in mind, let’s kick it over to Oscar for more of his strategy to make credit cards work for him instead of against.
Hello, everyone, and welcome back to my third installment. Today I will be sharing Six creative tips to get the most out of using this “delay payment period system.” Most credit cards offer cash back rewards anywhere from 1% to as much as 5%, even more. This can be a flat rate, fixed rate, or rotating categories for purchases like groceries, utility bills, gas, etc. In my opinion, this is to reduce the cost of the transaction fee amount(3%) to encourage you to use the card more often.
Now, how can you best incorporate the cashback rewards with this system?
1. List Your Recurring Transactions
This means: groceries, utility bills, car payment, etc.
This is not the time to hide your financial weaknesses. If you know you’re spending more than $100 on coffee, write it down.
2. Find the Right Credit Card Match
Take an inventory of the credit cards currently in your wallet.
When was the last time you looked through your card benefits?
Do you get any cash back or reward points for things like dining, travel, or telecommunications, and if you do get bonus points, do you have to activate them?
Take a look at the list you created in Step 1 and see if your cards match any of those recurring expenses.
Now that you know what cards best match your regular spending, it’s time to start assigning those cards to those payments. For example, if you know you eat out a lot and tend to use DoorDash or Uber Eats, add the right credit card to those platforms so that you can choose them at checkout and start maximizing your points.
Major banks feature their own reward platforms: Chase’s Ultimate Rewards, American Express’s Membership Points, Citi Bank’s Thank You Points, and so on. The more cards you combine from the same institution, the easier it will be to hit milestones.
I myself have three cards from Chase and am working on my fourth card. The reason behind this: to combine the Points or Cash Back rewards from all cards. If you would like an in-depth explanation of this tip, check out this YouTube video explaining the Chase trifecta.
3. Does Your Bill Offer a Grace Period?
There are certain bills from medical, government, or even private businesses that offer a grace period. Make it a habit to ask before offering to pay toward the bill. As an example, I pay my parents Medicare insurance; They have a grace period of more than 60 days for each quarterly bill.
Can you guess my next move?
Pro Tip: If there is something in the charges that seems suspicious, do not pay the bill. It is much harder to dispute a charge after it’s been paid. This is one tremendous benefit to delayed payment strategies.
4. Assign Major Bills to Credit Cards
Have you ever thought about using your card for things like rent, mortgage, or a car payment?
Look into a service called Plastiq. I would only recommend using this service if you are redirecting available cash (I will expand this in a moment,) or in the process of obtaining the cards’ introductory bonus points. The company charges a 2.5% fee on top of the standard 3% card fee; So a mortgage payment of $3k will cost about $165 in fees.
5. Give a Loan to a Friend
I should charge for this secret of mine. But, because you’re a friend of Joe’s, here you go!
Do you need another way of obtaining the cards’ introductory bonus points?
Would you like to know how to pull out your available credit and turn it into cash?
Make a payment to a friend, family member, or use your credit line to make an investment.
Welcome to my favorite tool, Venmo.
How is that done?
Well, first, Venmo is a peer-to-peer payment app. Some small businesses also use it too. To use this strategy, you will need a trustworthy person who is also using the Venmo app.
As an example, you will make a loan to this trustworthy individual in the amount of, let’s say, $2,000. Now, there are a few caveats: First, last time I checked, there was a weekly limit of $5,000. Second, Venmo will only allow you to make this sort of transaction after verifying your identity, and third, there is an unavoidable 3% credit card fee. The only other fee I’ve encountered is when I’ve needed Venmo to transmit a deposit to my bank instantly.
Caution: some cards may consider this a cash advance. So please, call the card company before using this strategy, as a Cash advance charge will be very pricy. I have been using this strategy with my Chase cards with no issues.
6. Extend Your Payments by a Year or Longer
Most newly approved credit cards offer a 0% interest APR for purchases and balance transfers (with a fee) anywhere from six months to a year, even longer. This means a further extension to pay off the statement balance in full.
Three things to remember:
- Make sure to pay the minimum monthly payment that the card company sets depending on the statement balance on the card.
- Be mindful of the total credit card usage, as anything over 30% can potentially harm your credit score. This is part of your credit utilization rate.
- Pay the entire balance before the extension is over, or else you will be charged a high amount of interest from the remaining balance.
I used this tip to place the down payment on my new vehicle. I have about a year with a 0% interest rate. Also, by using this strategy, I was able to obtain the introductory bonus points. This tip is extremely useful for redirecting available cash.
Now, let me explain what I mean by “redirecting available cash.” Let’s just say I bring home about $5k a month, and after all expenses (rent, loans, car payment, card payments, etc.,) $3k, I am left with $2k of available cash at the end of the month.
In this scenario, I am wanting to eliminate a small debt of about $17,500, and because of the high interest rate, I am spending about $600 monthly. How can I increase my available cash at the end of each month?
Tip #6 would be the answer.
I would use the newly approved card with a 15K spending limit and 0% interest APR for twelve months. For about 4 months, I will place all expenses on that one card using Tip # 4 and 5. That would increase my available cash from $2k to $4500 a month, totaling something near $18k.
But let’s not forget the $12k plus card fees of debt that had been transferred to the new card. With the loan now paid off, my available cash is now $2600 monthly. It would take almost six months to pay off the entire balance on the new card.
What if I need more time because of this thing called “Life?”
By the fourth or fifth month, I would apply for a new card with similar benefits and repeat the process until it’s done.
Once again, I hope that this rather long but fruitful post has opened up even greater possibilities of the power of credit cards. This is maximizing credit cards on a whole other level. We all have desirable or unavoidable purchases or payments to make sooner or later. Why not be informed to have the situation work for us, instead of against us?
I realize there is a lot to digest here. If you have any questions, please make use of the comments, and I’ll be happy to help clarify.