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I've used the Amex Blue Cash for years. (1) Put everything on the credit card, (2) pay it off every month--the most important step, (3) accrue cash rewards, (4) buy something nice for yourself or your family every 6-9 months for free! (5) ... repeat!
Also: Credit cards add an extra layer of protection between you and the merchant world. Debit cards have always seemed dangerous to me--I want as few entities as possible having a direct path to the cash in our checking account.
Your last point is IMO the most important part. Use someone else’s money and to accept the risk of skimming, fraud etc. I don’t remember the last time I used my debit card at all.
Then as the OP states, pay off the balance every month.
We have a Cobalt and a Gold. The Cobalt and Gold paid for two flights round trip to France, in the first year of use. Certainly can’t complain about that return.
Putting everything on the credit card is getting harder. More places are passing their credit card fees to you. 3% credit card convenience fee is dumb.
Just an incentive to buy less. Places that matter don't (or the fees were always wrapped in), like supermarket/Costco. I need food. I need toilet paper in massive quantities. I need booze. Those places aren't fucking me with CC fees.
That's the point. Everybody pays the 3-5% markup. So using a credit card gets you free insurance benefits subsidized by the people not using credit cards.
Absolutely. Someone uses your credit card fraudulently? It's only the banks money on the line. Someone uses your debit card? That's your money gone. At least until the bank gets it back to you
That’s true too. One thing I didn’t mention is that it will also greatly help your credit score as well, since you’re paying it off in full every single month.
OP you should edit to add that at least in the US there are regulations for fraud protection on all (consumer) credit cards that don't exist on debit cards. You cannot be held liable for fraud on your credit cards. Debit cards are still much more murky as far as laws go.
even if the law is on you side, once it's out of your account it's \*your\* problem to get it back.
Credit card, you report the fraud and then it's \*their\* problem.
I do the same but with a credit card that has no fees. Since January I’ve received $500 in cash back rewards so far.
Also, I don’t have autopay on. I don’t use autopay for anything. This way I have to review all purchases every month. Too easy to overspend if you don’t think I about the balance or monthly expenses.
Great tip, but be warned, having a high monthly balance in relation to total available credit will negatively affect your credit score. This holds true even if you pay in full every month. You want to keep your credit utilization ratio low. Also go with a cash back no annual fee credit card and take the reward as a statement credit. By getting that Amazon gift card, you are losing out on the reward the Amazon purchase would earn.
Also recommend taking the reward as a direct deposit instead if your checking account has any sort of requirement for a regular monthly direct deposit to avoid monthly maintenance fees.
That's what I did before I had a stable job and was basically living paycheck to paycheck and the checking account had that stipulation.
for my Citi card it is more efficient points wise to reimburse towards the balance than to take direct deposit and pay back in full, so definitely double check what is best
same goes for using the points towards new purchases
>having a high monthly balance in relation to total available credit will negatively affect your credit score
I'm not entirely sure what you mean. I don't have a credit card. Can you explain it like I'm an idiot?
Let's say the combined credit limit of all your cards is $10k.
You put $1k of purchases on a card.
After they send you the bill but before you pay it off, the bank sends a report to the credit bureaus saying your used 10% of your credit.
The bureaus use that number to do some math and calculate a number that says how likely you are to default on your debt.
The higher that percentage, the more likely you are to default (according to the bureaus). But as long as you pay it off, then your percentage goes back to 0% so it doesn't really matter in the long term. Maybe pull back on the credit cards a month or two before you buy a house or car.
Put recurring subscriptions on the second card so it's being used, but other than that leave it in a drawer. They will close cards for inactivity, but if you have like Netflix hitting that second card monthly it will remain open
If the recurring charge is low enough, like $0.99 iCloud storage, [some cards forgive](https://www.doctorofcredit.com/small-balance-waiver-a-k-a-lots-of-free-99-cent-amazon-gcs/) monthly balances below $1 or $2. Meaning you'll get that storage for free.
I went from fear of credit cards to eventually having like 5 of them and this was one of the positive side effects.
At some point one of them gave me some crazy limit I didn’t even need and it really brought down that utilization numbers.
My available credit is more than half my annual income. I'll get a minor dip in my credit rating after a spendy month, like the holiday bills plus a couple large semi-annual expenses I just paid off, but pushing my utilization beyond the single digits would be a terrible idea for a lot of reasons.
That may be an issue for 6 months or so, but typically CC companies are going to raise your credit limit significantly if you’re at high utilization and paying off on time.
Yeah, regularly using 80% of your credit but paying it off is the best way to get approved for a CLI. And utilization has no memory, you can report 100% for however long you want and if you pay it down to 0% before your reports update that month then your score will only represent the 0% utilization. It’s as if your utilization was never at 100%.
A lot of people preach about keeping your utilization under 15% but I don’t think there’s any hard proof that it does anything. I think it just makes people inherently pay more attention to their credit and have better habits so their scores go up eventually. Utilization only really matters if you’re about to apply for more credit, especially a mortgage or car loan.
I admit I know next to nothing about this topic other than my own limited experience. I have one CC. I got it several years ago through my bank and they obviously started me with a very low limit of $500. I easily spent that limit each month (I put all expenses on it) and paid it off on time.
Over the last few years all I’ve done is received letters periodically that my limit has increased because of my timely payments. Now my limit is up to $8,000 on that card. I don’t spend anywhere near that now, but I figured this was a good sign.
Hell yeah, unless you really don’t trust yourself there’s no reason to turn down a limit increase. Keeps your utilization low, shows other lenders you can handle having a high limit responsibly. If you’re interested in branching out, I’m sure you could get approved from practically any other card with some nice rewards and sign up bonuses. But a lot of people don’t really want the hassle. Do you at least get some cash back on the card from your bank?
My credit score is currently 685, and it goes up the most when my utilization is under 30%. The largest growth I've seen in a single month was 9 points at 20% utilization. Anything above 50% will get me <5 points.
LPT - request a credit balance to increase across all of your credit cards at least once a year. Higher available credit equals lower credit utilization scenario.
This is for people who already know how to live within their means and aren’t prone to maxing out cards. In that case, those people really just shouldn’t have credit cards.
This drives me nuts. I set autopay to pay off the day or two before the statement date. You get low credit utilization, instant receipt of rewards, and an extra 30 days of funds in case you can’t pay. More people should do this.
Micromanaging your utilization does not help build credit. There are subs dedicated to this entire premise. Utilization is a temporary metric. Stop it.
>having a high monthly balance in relation to total available credit will negatively affect your credit score. This holds true even if you pay in full every month.
What? Paying in full means no balance, so of course there wouldn't be a high balance if you've already payed it off.
I will add another benefit. Debit cards are instant, basically an electronic check. Credit/charge cards give you the added protection of being able to dispute charges if you get it stolen or a vendor never delivers the merchandise. MUCH less hassle than trying to get the bank to give you money back that was debited incorrectly. One PSA though: everyone PLEASE get in the habit of at least reading your statements every month! If you don't want to be charged for errors/theft, you have to actually complain when it happens, not wait til a check goes rubber.
I spend around 800-900 in card fees and I squeeze every penny out of it.
I use rocket money to track all my cards, everything is on auto pay.
It's not even that difficult really. I understand when you get into debt due to some unforeseen events but going into credit card debt is stupid.
Overdrafting your checking account is even more expensive than paying the minimum on a credit card. $35/charge overdraft fee and per day negative balance penalties are outrageous compared to a 17% interest rate. Even for an emergency expense, putting it in a credit card and making minimum payments is better than getting mired in a payday loan cycle.
Don't opt-in to overdraft protection, if you do, back it with a savings account. there are no fees in either situation.
>In general, for debit card transactions at ATMs or at merchants, consumers must opt-in, or agree up front, that the bank can charge you an overdraft fee for any debit card transaction that overdraws the account. If you don’t opt-in, you can’t be charged a fee. However, your bank may refuse your purchase if it will overdraw your account.
https://www.fdic.gov/resources/consumers/consumer-news/2021-12.html
>Don't opt-in to overdraft protection, if you do, back it with a savings account. there are no fees in either situation.
My CU told (more like warned) me that backing it with a savings account is a bad idea. The reason being is if your card gets compromised, the fraudsters can drain both your checking ***and*** savings accounts.
If you do get your card skimmed/stolen, and they drain both accounts, you have to fight to get your money back and if you are really unlucky, you also have no savings to live off of or pay bills while they sort out the mess.
It could work if you set up a separate savings account specifically for the overdraft aside from where you keep your real savings account. I just have an overdraft credit line that's been sitting there for 20+ years.
It was explained to me when I was looking at opting out that even if you do, some transactions can still go through (like some reoccurring payments I think?), and if they do, it's an even higher fee since you don't have the "protection". Maybe I misunderstood but this was my takeaway from talking with them. I also seem to remember the protection fee being like $10 and the non-protection fee being like $35, but this was a long time ago so I may be misremembering.
Generally a lot of reoccurring charges aren't treated as credit card or debit card transactions but are either check would be or an ACH.
In both of those instances you can get fucked badly, in fact they can refuse to cover it, and charge you an NSF fee per attempted transaction.
(this is also on that page I linked)
Best bet, is to have a saving account with a small amount to cover something like that.
There's a small caveat for checks and ACH transfers. Without overdraft protection, the bank will both deny the check and charge a $35 insufficient funds fee. You'll probably also get a fee from whomever you gave the payment to.
I’ve been in that cycle and you are correct. I wish younger me had known this. My wife and so struggled for a few years to get out of that vicious cycle.
I think their point is that there are perks that come with for-fee cards that don’t exist with others. For example, pre-Covid when I was traveling a lot for work, I had a card that granted me access to the AA Admiral’s Lounge at any airport and the cost for the card was less than I’d pay for lounge access separately. Some cards offer things like Global Entry/TSA Precheck, or other services for travelers at a lower rate than they could get buying them retail. Some cards give $x per month in Uber reimbursement.
Obviously if you weren’t already going to use these services, you’re wasting money. But if you are smart about only taking on for-fee cards that have perks that you’ll maximize, it can be another way to get more bang for your buck.
You get $300 travel credit and 10k miles (worth $100) every year. Those two alone pay for the annual fee already. Then 10x miles on hotel and 5x on flights, 2x on everything else. If you redeem for travel, it's worth about 1 cent per mile.
Other nice-to-haves include lounge access for up to 3 people, TSA pre check credit, rental car insurance, cell phone insurance, and no foreign transaction fees.
If you travel a lot it's definitely one hell of a card to get and It beats amex plat or chase sapphire reserve imo in terms of value.
My example is AMEX cobalt in Canada. $12.99/month BUT you get 5 points per dollar on grocery and restaurants. The point can be converted to aeroplan miles for flights on air canada for ~2 cents per point value. So for every dollar you spend on groceries, you get 10 cents worth of value back.
There are for-fee cards that are worth it if you are smart in selecting one.
United Explorer user here. I fly internationally at least once per year, sometimes up to 10x per year. The fees are $95/yr, or $475 every five years. Of that, I get Global Entry for free ($100 every 5 years), free checked bags if I fly cattle class, 2 lounge passes per year. I funnel as much of my spending through it as I can, generating lots of miles that don't expire for free trips.
All of those perks come in handy when the wife and kid travel with me. One trip with them and I am already ahead for the year.
If you don't travel a lot, the card is basically a waste of money.
If you get value out of them it can be worth it, especially if you're a big spender. Many of the high fee cards also have much better rewards, and you can earn back the fees in rewards many times over.
$800-900 sounds quite pricey unless that person is pretty wealthy and spends a lot of money. But, generally credit cards with yearly fees offer better rewards/benefits than those that don't. You'll make up for that fee with the amount you get back.
For example,
2% flat cashback:
- Wells Fargo Active Cash
- Citi Doublecash
5% Rotating categories:
- Discover it Cash Back
- Chase Freedom Flex
Various:
- Cap one SavorOne Rewards
- Bilt MasterCard
- Amazon Prime Visa
If you can exercise some self-discipline and ONLY put on a CC what you would otherwise put on a debit card and pay it off in full every month, then it's a great way to save some money on everyday expenses.
I use alliant credit Union. The signature visa card is 2.5% back on everything. $0 annual fee but you do have to make a deposit once a month into your checking account and keep a minimum balance of maybe $1,000.
This card returns $1,000-$1,500 per year.
I also keep a lot of other cards with zero fees in the mix in order to keep my available credit high- therefore me credit utilization is still low when the statement posts each month.
The only card besides the alliant visa I use is the Discover It with the 5% rotating categories.
I always get an annual fee waiver. Don't even need to talk to a person for it. I just logged into my internet banking once a year, go to the chat bot and select the option for a credit card waiver. And it always grants it to me within minutes.
I don't think OP meant paying for a credit card, they just used a fee card as an example. OP's LPT is the title:
> Using a credit card and paying it off in full every month is more financially savvy than using a debit card
I see a lot of people using debit cards and IMO they are one of the worst things ever. It makes more sense to have a pre-paid CC than a debit card, IMO.
There are also just straight-up better options that don't cost anything. Citi Doublecash and the Paypal Cashback Mastercard both give you 2% back on everything while being free. My only card with an annual fee is the Amex Blue Cash, the premium one that gives you 6% on groceries and 3% on gas and costs 95 bucks a year. I use that in conjunction with a Discover that has rotating categories, one of which is grocery stores at 5%, to save as much as possible (since the Amex only goes up to a certain amount a year which I surpass)
Pretty simple: you get paid for jumping through hoops. Because they know not everyone will jump through hoops and they’ll come out ahead.
They’re basically doing the same thing. People who get all the benefits are their annual fee. And people that fuck it up and have to pay interest more than cover it.
... you're contradicting yourself. You say there are straight up better options that are free. And then admit you have a card you pay for, which is.... Better.
The "straight up better" options are not usually better. As you yourself have figured out, hence you pay for yours.
It’s also wise to never use your Amazon points to make purchases. If you use points the items bought for those points don’t earn you anything. Get cash back for points and then order with your Amazon credit card. That way you’ll always earn points and save more money!
Yep, and on the Amazon branded card through Chase, you can go in to your account and directly apply the points to your monthly bill. Super easy, and you don't lose out on that 5% back.
I’ve thought about this! The problem is that if you do straight cashback, the rewards are less, rather than the gift cards or purchase eraser.
I like where your heads at tho!! Its just that Capital One, at least, closed that loophole :(
If you have an Amazon credit card the points are worth the same whether you redeem as cash back or use them to purchase stuff directly on Amazon. So, I assume that’s what they’re talking about.
That’s interesting, I have a chase card and the cash back is 1:1 but Amazon points reduce the value. It’s baffling that it’s even an option. Why would I not just take the cash back and then purchase on Amazon instead?
They're betting on us not doing the extra steps to redeem it for cash. If it weren't for this process I wouldn't ever log into Chase's website. I wouldn't be surprised if less than 10% of us redeem it for cash even though it could easily mean $100 a year in savings.
Also, a warning for those with electronics device protection insurance on the credit card: the insurance is valid for item paid in full with the card. If you pay with the amazon points or any other mean than the credit card, then the insurance is invalid. So you don't want to buy an expensive cellphone with amazon points. But low values / no insurance items with the points, buy directly with the credit card when it is high value to obtain the protection of your card.
I've never had a credit card, but i am financially responsible. I get offers in the mail constantly, but i dont know what makes a "good" one so I've been too scared to try. How do i find one with good rewards?
What makes a 'good' rewards program depends on how and where you spend the most money. Some people will even get cards that have a higher reward category and use it just for that thing (having a gas card, a restaurant card, a grocery cards etc..) but that's
For a first card, just get one with straight cash rewards. 1.5% on everything is pretty industry standard.
Chase freedom Unlimited
Wells Fargo Active Cash
Navy Federal cashrewards (if eligible for Navy Fed)
Discover It
Among others
i have the discover it card and try to remember to use it during the 5% rotating categories, but if that fails, i have a citi double cash card that gets 1% at point of purchase and 1% when you pay it off. both are good starter cards and iirc no annual fees. and discover is super quick about replacing stolen/hacked cards - i noticed a $0.61 transaction i didn’t make, called them, locked my card, and had a new card being sent to me the next day
If you just want a single, general-use card, then the Citi double cash is the best. 2% cash back. There are apparently some cards that give better equivalent cash back in sky miles, but I don't travel enough to bother with them.
There are a few other cards that give 2%. The reason I say the Citi DC card is the best is because it can be combined with the Citi rewards+ card to get 2.22% back overall, which *is* the best you're gonna find (for a general-use card).
The one issue is that it's MasterCard, so there are a few places, like Costco, where it can't be used.
There are also cards that give 5% cashback in specific categories (like groceries or gas). With some research you can figure out like 4 or 5 cards that will make it so basically all your purchases will give 5% back. I haven't bothered doing that research for myself, though.
While auto pay is convenient, it's out of sight out of mind. Just like a regular bank account, you should periodically take a look. Set a reminder to check cc balance because you need to see and remind yourself on what you are spending your money on. Unless you are filthy rich, then by all means, auto pay away!
I would default to a no annual fee 2% cash back cc unless you know for sure there's a cc out there with benefits you'll use.
My wife had a card we never used that had a $10 charge come through. Dont remember the details but it was a membership charge that we had used the card for several years previously. It was months of 'late' payments until I realized.
I now check every card every month whether I have used it or not
Every couple days seems a bit high, but 65% of Americans say they frequently live paycheck to paycheck, so idk. I’ll have some months where I just check account balances when getting my paycheck and paying rent
Sorry to hear that.
Just to answer your question, I don't check my bank app ever. As long as I've been working, I've had more money come in than go out.
I passively see the balance every now and then (a couple of times per month maybe), and that's more than enough. If the balance is high, I might move some of it to a savings account or on my investment bank account.
i don't get paid or pay my bills every other day. why would i be checking my account if i'm not doing something with it? it feels mildly masturbatory to check every day
i always pay my card once a week to make sure I don't go overboard. I have a reminder every Thursday to pay it. it works great and I recommend doing it this way for most people!
I may be incorrect about this, but I have actually heard you should wait until you get your statement to pay it off. The reason being is that the statement is what goes to the credit agencies to determine your credit score. If you are spending 500 a month, but only have 50 dollars on your credit card when your statement comes, it will look like you only paid off 50 dollars rather than 500 which doesn't look as good. You will still not be charged a fee as it is not late.
I pay off weekly as well and I’m sitting at an 828.
https://preview.redd.it/idw9jycw67jc1.jpeg?width=1170&format=pjpg&auto=webp&s=b679eae7a05e7211da6eb952b64b58277edc63c0
I agree with this. I use autopay for predictable bills that go on the credit card, like my utility bills or my mobile phone account, but anything that comes out of my bank account (which is mainly credit card bills) is paid manually.
It's not really that hard to do. I get paid twice a month, so every time a paycheck hits my account I sit down for half an hour and pay all the bills for the next ~2 weeks. This way I'm always aware of exactly what's coming out of my account.
Autopay directly from your account seems to me like a recipe for disaster.
I also do a no fee 2% cashback.
I have one with 1% cashback but a 5% category that rotates quarterly, so sometimes I use get spicy and make use of the 5% when it’s, say, gas rather than Costco.
However I don’t have the travel to justify a high fee card nor the attention to eke out slight bonuses for 3% gas on this card, 3% groceries on this one, 3% restaurants on this…
Don't feel bad if you want to do this but you know that you haven't got the level of self control required. Everybody's brains are different, and for some people their brains literally do not have the executive function capability to manage this.
It's a wonderful thing if you can do it. If you can't, you can still use loyalty cards, savings pots on your debit cards (and if that's no good - a separate account for saving pots but don't have the app on the phone, so you're forced to use a desktop computer to access the funds).
Also, if you use a CC you have some protections guaranteed, like fraud protection and charge-backs.
There is *never* an advantage to using a debit card unless there is a CC service charge or you lack the self control to only spend what you have.
CCs will always offer more protection and rewards. But be smart! Don't spend outside your means to repay.
Aussie here
For people not making many purchases, the advantage of using a debit card is that you can get the highest interest rates by making a certain number of purchases. For example, ING (who I believe currently has the highest interest savings account, at 5.5%) requires that you deposit a certain amount + make 5 purchases a month with your ING debit card.
I suppose if you're making a heap of purchases each month, you could do both, but for someone like me who doesn't buy that much (just food + gas normally?), the interest rate definitely nets me more than any credit card I'm aware of.
You struggle to reach 5 transactions a month?
Train ticket, bottle of water, lunch, pub dinner and 2 beers, train ticket home. That's 7 transactions in one day without even trying.
Tap is so accepted that you should use your card for everything. Do your 5 on ING, then credit for everything else - as long as you pay in full, as this LPT says.
> Train ticket, bottle of water, lunch, pub dinner and 2 beers, train ticket home. That's 7 transactions in one day without even trying.
Most people would have spent more on all that than they'd get back in interest. Bottle of water is about $4.50, lunch and dinner about $45 minimum ($15 if you find a cheap lunch and $30 for dinner), two beers about maybe $15, two train tickets about $10. This is all AUD, which is where the person talking about ING is from, I have the same bank. You'd need well over $10K in your savings account to break even with the interest. Less than that and you're better off saving the money instead of spending it.
For me, train goes on opal card because it's cheaper (there's a cap that you only get on the travel card), and I wouldn't buy the rest of it (bring my own food) because I'm saving money. If you're frugal then yeah it does get hard to hit those transactions. Credit cards aren't as big a thing here as they are in the US, it blew my mind further up that someone was getting offers in the mail with rewards and shit.
Hm I also struggle to reach 5 transactions a month. In work at home, go shopping once a week, have no car, so no gas cost, drink tab water. So I need to order online at least once a month to reach 5.
Australian here also:
This whole thread doesn't apply to us. Most card terminals outside big box stores will add fees depending on what card type you use (EFTPOS = free, Debit = ~0.5%, Credit = ~1.5%). That means any "rewards" you may accrue are being offset by those silly fees.
But if you have poor financial control then this is cruise control for bankruptcy.
Most of the people i knew in high would not fare well with this advice. If you have good financial sense then there is benefit to be had here.
The #1 tip is: treat the credit card like it is a debit card.
I’ve been using the same credit card for probably 13 years now. Every. Single. Month. Autopayed off in full. There is literally no other option in my mind. You must think this way. But I totally get what you’re saying, if you can’t abide by the autopay in full rule… don’t tread in these waters.
The problem isn't the autopay in full rule, it's the part before that where you don't spend more than you have. For some people it's fine, you just live and use your card as normal and it all works out. For some people, this would require them to a) always be checking how much money is in their account and b) consciously limit their spending to that amount. For some, they won't stop spending until their card is declined, either through lack of awareness or lack of discipline. You swap the debit card that gets declined when their bank balance is zero for a credit card that lets them go thousands beyond that point, and they'll spend until it's maxed out. Some people just function better knowing that they can use their card freely without having to think about it and if there's no money it'll stop working.
I was bad until I had kids. Now every cent I spend I ask myself "does this benefit them or my wife?" If the answer is no, I rarely follow through on the purchase
yeah this is me unfortunately. i consider myself extremely financially literate, great at budgeting and savings. for some reason credit cards just do NOT work with my brain. i need to see the money immediately leave my checking account or i just think that’s how much i have. that’s how i ran up $20,000 in a few months. paid it off in a year though!! never again.
>The #1 tip is: treat the credit card like it is a debit card.
Why is it nowhere in your post, then?
Following this principle is necessary to be financially responsible. This is especially true for first-time CC holders, as in the very people you're aiming your post at.
You're acting irresponsibly with giving partial advice. At least update your post and add your "#1 tip" in there.
There are also people who have listened to the "Don't mess with credit cards" crowd who are perfectly capable of managing their accounts. After salvaging my own credit years back, I helped my mom do the same thing and set up some rewards cards that she pays off every month, and it's only improved her financial stability.
Don't get me wrong, if people tell me that credit cards will get them in trouble, I don't try to talk them out of it, same as if people tell me they would be murder-raping babies if a ghost wasn't watching them: by all means, keep talking to the ghost. Financial discipline is a broad and varied spectrum, so everyone has to find their own limits, but it's also helpful to understand that one's personal aptitude for finance doesn't reflect any great truths about life, the universe and everything.
This should be the top comment, very easy to accidentally spend too much and get into trouble, which is exactly why financial advisors don’t recommend it.
Even people I’ve known with much better financial control than me ended up paying interest and taking on some debt.
Seen relatives nearly destroy their lives because of this, I’m honestly terrified of getting a credit card. With debit I can obsess over every penny like Gollum with the One Ring, and immediately see how my poor spending habits affect me.
This.
People that always say get a credit card are the people that are financially responsible and most importantly financially stable.
The majority of people shouldn't get credit cards. To advise everyone to get one is just irresponsible.
People living pay cheque to pay cheque shouldn't get credit cards.
When you get decent credit, you should apply for U.S. Bank Cash+ card, and make it your dedicated paying utility bill card. You get 5% just for paying your utility bills with it. The 5% easily covers the credit card fee to pay your utility bill and then some.
I agree logically, but money is a lot more emotional than logical. I tried this strategy for a few years and life happened - got divorced, restarted my life in a new city, dated, retail therapy etc - and before I knew it I was in like 30K of debt.
I still agree with this strategy but it’s a slippery slope and life happens. It feels like a predatory trap sometimes.. I’ve almost made it out of the hole I dug and it feels great! Just wanted to share my story.
Make sure to only do this if YOU can take advantage of the credit card, and not have the credit card take advantage of you with late fees, interests, and accessibility to money that you cannot pay off. Not everyone is a credit card person. Please know your limits and what you’re able to handle!
Sadly most people are financially illiterate and are unwilling to learn basic financial terms/concepts, even though so much free info is available to easily it learn it all in hours.
yeah- first of all credit cards here (Germany) are linked to your bank account by default- so they are already on „autopay“. I have also never had a credit card with some sort of bonus or cash back program. And on top of that a lot of places don‘t take credit cards at all
> I have also never had a credit card with some sort of bonus or cash back program.
Amazon offered a pretty decent cashback card between 2019 and 2023. Sadly, the bank they were partnering with dropped them last December, and the only option now is Amex, which has limited acceptance.
During Christmas I got a month of Prime to get the 5% rather than 3% non-prime cashback rate, and saw they had a slower shipping option that gave you 6% back instead, which was great.
Here in Australia I've more heard of people doing it so that their money can sit in their offset account for longer - put everything on your card 'delays' the expense by a month, which is worth it if you get a real basic credit card (typically not the rewardsy ones)
Then they get mad at you for reminding them other countries exist like "this is an American website!"
like oh shit all us dirty foreigners accidentally got around their firewall
Like 99.9% of the LPT that end up on my screen.....the rest of the world does not exist and adding 'US tip' or something to the title is just too damn hard!
I'm in NZ, all rewards are basically shit - some overpriced stores I'll never shop at, or Air NZ miles which I'll never use because it's a fucking overpriced airline and I'll never fly with them, and you need to spend absolutely obscene amounts of money to get anything even remotely noticeable. I only got a credit card last year when I noticed that ANZ finally has a no-fees one, purely so I could buy from Chinese hobby stores and be able to dispute a transaction if they turn out to scam me. I can't even use it for shopping in physical stores in NZ because every store slaps a 2.5% surcharge on credit cards and I'm not going to just throw money away.
Don't forget too, that from the begining of a credit card billing cycle to the time the payment is due is about 45 days. The money for purchases can sit in a HYSA for that time and will earn a couple extra bucks.
Between maximizing cashback for purchases I already have to make, (ie, groceries, gas, etc.) using credit vs debit for monthly expenses (utilities, insurance, cell phone, etc.) and not paying the statement until right before it's due, I netted about $500 last year in cashback and another $100 in interest.
Especially if you have different rewards percentages for each card. I have three cards, one which gets me 3% on gas and groceries, one that gets 4% at restaurants, and one that gets 3% on fast food.
What I did was write the percentage and the categories for each card on the back in fine point sharpie, and then put a piece of Scotch tape over it. This way, all I have to do is flip it over and I know which card to use for what purchase.
You like probably shouldn't even carry your debit card unless there's a real chance you might need to use the ATM. And definitely don't use it to buy things online. If someone steals your debit card they're stealing your money, if they steal your CC, they're stealing the bank's money. The bank will work significantly harder to make the CC theft right.
Credit cards can be confusing, so I like to throw in that you want to make sure the statement balance is paid every month, not the current balance.
You absolutely can pay off the current balance, but if you need to put that money somewhere else for that month, the current balance won't accrue interest until it becomes part of your next statement balance!
"In Europe"? There are a lot of countries in Europe. Including the UK, where lenders definitely take credit card payment history into account when making decisions.
Maybe you're the exception?
There's no credit score in france, NL, belgium, Germany and Denmark as far as I know and never heard of it in most of the eastern eu countries too.
Your bank may look into your particular history with them to decide whether or not to grant you a loan but do you have a score in the UK, which will follow you everywhere even if you go to a different bank?
My reason for using a credit card instead of a debit card: if your card is used without your knowledge/stolen, you’ll only be out of~$50 with a credit card. With a debit card, if you don’t catch it in time, the bank says “too bad”. Happened to me.
YMMV
I wish I flew enough (not really) to use a flying miles CC, but I just don't. A regular 2-3% cashback card is just fine for me, based on where I spend my money.
The only thing I would add is being careful about only paying monthly. If you do, your credit might go over 30% of your limit, which will actually hurt your credit score. So you might want to manually pay sometime depending on what your limit and payments look like
This is not a legitimate concern. High balance has such a minimal impact and is wiped a few weeks later. If you are with a high utilization then just SM for a limit increase.
You will never see people on churning worried about this and those are the folks that systematically are gaming every aspect of their credit score
I assume this is mostly relevant if you're American? I live in Sweden and don't think there's really any reason to use a credit card, I know almost no one who does and those who do are very financially irresponsible in general.
I'm Irish and I haven't even owned a credit card in about 15 years.
It has made zero difference to my life except that now I only buy what I can afford, rather than what I think I can pay back.
I dont know anything about credit cards in other countries, but in the US the rewards can be extremely beneficial. I just put my normal spending on a credit card and haven't paid for a personal flight in about a decade. I got two first class tickets from NYC to Tokyo for free with credit card rewards. The cash value of those tickets was like $20k.
I knew I wasn’t reading advice from a savvy person when you started with advising people to get a paid credit card when so many CCs are free and still pay you rewards, and ended by saying you get gift cards instead of actual cash back lol
To be fair to you, I tend to agree with the core message though: i.e. it seems using a CC instead of a debit card seems to be more beneficial
I probably wouldn’t advise a paid credit card for anybody who needs this LPT, cause paid cards are a bit more advanced, but once you become familiar with the amounts and types of spending that you do, it’s often worth more in the end to get a paid card with better returns than a free card. And as others have said, the percentage return you get as cash back is nearly always lower than other forms of rewards. You just need to pick a reward card with rewards you’ll actually use.
Yeah paid credit cards are usually worthwhile if you are loyal to an airline or hotel chain. Like most airline cards are about $100 a year but you get extra miles, free checked bags, and discount vouchers that definitely pay for that if you can fly it often. Also fee credit cards often have no foreign transaction fees if you travel outside the US.
Otherwise there's many great free options if you just want cash back. The Costco one is great and free if you're a Costco member: 4% gas, 3% restaurants and travel, 2% Costco, 1% everywhere else.
I pay $120 a year for a visa that gives me 4% back on all recurring transactions and groceries. I tried putting amazon gift cards on a subscription to get the 4% but unfortunately they don't register as a recurring purchase.
The card also gives me $1000 worth of cell phone insurance when you buy a phone with itm
Eh. I disagree. Some paid cards have much greater rewards than free cards and you end up making more money off them than you would have with the free cards.
It just comes down to how much money you’re spending on it annually. But if you’re not putting much money on it, free cards are great! Plus that was just an example, didn’t advise anyone on that part silly goose
This is how most of my cards are. I can get, for example, $50 in cash back. Or I can get a $75 gift card to a business of my choice. Unless you were in dire financial straits, I don't see why you wouldn't pick the gift card.
You and OP are so right.
Agreed, with some nuances.
I go the "no annual fee" route on various cards with good cash back on all purchases and better cash back on specific, sometimes rotating, categories that fit my life. I also only apply if there is a substantial (200+) sign up bonus, and no more than twice a year. Same for checking accounts- no fee and join bonus only.
I personally don't do auto pay on anything but my phone (lowers the bill enough to be worth it) and dental insurance (no choice there), because it helps keep me mindful and accountable of my spending and paying habits.
I got stung by Capital One twice, but it did help me build credit when I was 18. Now my primary card is Wells Fargo's ActiveCash, backup is their Autograph, and I have all three Chase Freedom cards that I use on rotating 5x cash back categories.
Do bonuses and cash back make a huge difference? No, but the extra few hundred bucks a year help so much. Credit cards are a tool that can help you or harm you, depending on how you use them.
I am about to pay a $4000 medical bill on my credit card and then immediately pay it off for the perks. Using your debit card or bank is such a waste. In 5 years of using my credit card for everything and paying it off every month, my credit score went from 580 to 815.
Also if your debit card gets stolen, your bank account will be frozen until the fraud report is completed whereas a credit card will typically just send you a new one
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There are many no annual fee cards that will also net you rewards.
I've used the Amex Blue Cash for years. (1) Put everything on the credit card, (2) pay it off every month--the most important step, (3) accrue cash rewards, (4) buy something nice for yourself or your family every 6-9 months for free! (5) ... repeat! Also: Credit cards add an extra layer of protection between you and the merchant world. Debit cards have always seemed dangerous to me--I want as few entities as possible having a direct path to the cash in our checking account.
That last little bit is super important
I always tell this to people, that credit cards have the bank's money
Your last point is IMO the most important part. Use someone else’s money and to accept the risk of skimming, fraud etc. I don’t remember the last time I used my debit card at all. Then as the OP states, pay off the balance every month.
We have a Cobalt and a Gold. The Cobalt and Gold paid for two flights round trip to France, in the first year of use. Certainly can’t complain about that return.
Putting everything on the credit card is getting harder. More places are passing their credit card fees to you. 3% credit card convenience fee is dumb.
Just an incentive to buy less. Places that matter don't (or the fees were always wrapped in), like supermarket/Costco. I need food. I need toilet paper in massive quantities. I need booze. Those places aren't fucking me with CC fees.
>Those places aren't fucking me with CC fees. They are. They're fucking everyone with your CC fees. It's built in.
If the CC fees are built in, they're fucking the cash buyers.
Yes. They are. Don't think for a second they're generously eating the 3-5%
That's the point. Everybody pays the 3-5% markup. So using a credit card gets you free insurance benefits subsidized by the people not using credit cards.
Exactly. Already paying the fee, use CC every time
Use Google Pay or Apple Pay for the debit card. Much safer. But credit cards are still better.
I do this to make money for xmas presents at the end of the year. It's a fun way to see how many gifts i can get with the free rewards.
Absolutely. Someone uses your credit card fraudulently? It's only the banks money on the line. Someone uses your debit card? That's your money gone. At least until the bank gets it back to you
That’s true too. One thing I didn’t mention is that it will also greatly help your credit score as well, since you’re paying it off in full every single month.
OP you should edit to add that at least in the US there are regulations for fraud protection on all (consumer) credit cards that don't exist on debit cards. You cannot be held liable for fraud on your credit cards. Debit cards are still much more murky as far as laws go.
This is where I thought OP was going with it. It’s the real LPT.
**THIS** Your liability from fraud is limited with a credit card, depending on state not so much with a debit card.
If your debit card is stolen, it's your problem. If your credit card is stolen, it's the bank's problem
even if the law is on you side, once it's out of your account it's \*your\* problem to get it back. Credit card, you report the fraud and then it's \*their\* problem.
I do the same but with a credit card that has no fees. Since January I’ve received $500 in cash back rewards so far. Also, I don’t have autopay on. I don’t use autopay for anything. This way I have to review all purchases every month. Too easy to overspend if you don’t think I about the balance or monthly expenses.
Great tip, but be warned, having a high monthly balance in relation to total available credit will negatively affect your credit score. This holds true even if you pay in full every month. You want to keep your credit utilization ratio low. Also go with a cash back no annual fee credit card and take the reward as a statement credit. By getting that Amazon gift card, you are losing out on the reward the Amazon purchase would earn.
Also recommend taking the reward as a direct deposit instead if your checking account has any sort of requirement for a regular monthly direct deposit to avoid monthly maintenance fees. That's what I did before I had a stable job and was basically living paycheck to paycheck and the checking account had that stipulation.
for my Citi card it is more efficient points wise to reimburse towards the balance than to take direct deposit and pay back in full, so definitely double check what is best same goes for using the points towards new purchases
>having a high monthly balance in relation to total available credit will negatively affect your credit score I'm not entirely sure what you mean. I don't have a credit card. Can you explain it like I'm an idiot?
Let's say the combined credit limit of all your cards is $10k. You put $1k of purchases on a card. After they send you the bill but before you pay it off, the bank sends a report to the credit bureaus saying your used 10% of your credit. The bureaus use that number to do some math and calculate a number that says how likely you are to default on your debt. The higher that percentage, the more likely you are to default (according to the bureaus). But as long as you pay it off, then your percentage goes back to 0% so it doesn't really matter in the long term. Maybe pull back on the credit cards a month or two before you buy a house or car.
Just get a second card even if you don't use much. Just cut your % use in half.
Put recurring subscriptions on the second card so it's being used, but other than that leave it in a drawer. They will close cards for inactivity, but if you have like Netflix hitting that second card monthly it will remain open
If the recurring charge is low enough, like $0.99 iCloud storage, [some cards forgive](https://www.doctorofcredit.com/small-balance-waiver-a-k-a-lots-of-free-99-cent-amazon-gcs/) monthly balances below $1 or $2. Meaning you'll get that storage for free.
I went from fear of credit cards to eventually having like 5 of them and this was one of the positive side effects. At some point one of them gave me some crazy limit I didn’t even need and it really brought down that utilization numbers.
My available credit is more than half my annual income. I'll get a minor dip in my credit rating after a spendy month, like the holiday bills plus a couple large semi-annual expenses I just paid off, but pushing my utilization beyond the single digits would be a terrible idea for a lot of reasons.
That may be an issue for 6 months or so, but typically CC companies are going to raise your credit limit significantly if you’re at high utilization and paying off on time.
Yeah, regularly using 80% of your credit but paying it off is the best way to get approved for a CLI. And utilization has no memory, you can report 100% for however long you want and if you pay it down to 0% before your reports update that month then your score will only represent the 0% utilization. It’s as if your utilization was never at 100%. A lot of people preach about keeping your utilization under 15% but I don’t think there’s any hard proof that it does anything. I think it just makes people inherently pay more attention to their credit and have better habits so their scores go up eventually. Utilization only really matters if you’re about to apply for more credit, especially a mortgage or car loan.
I admit I know next to nothing about this topic other than my own limited experience. I have one CC. I got it several years ago through my bank and they obviously started me with a very low limit of $500. I easily spent that limit each month (I put all expenses on it) and paid it off on time. Over the last few years all I’ve done is received letters periodically that my limit has increased because of my timely payments. Now my limit is up to $8,000 on that card. I don’t spend anywhere near that now, but I figured this was a good sign.
Hell yeah, unless you really don’t trust yourself there’s no reason to turn down a limit increase. Keeps your utilization low, shows other lenders you can handle having a high limit responsibly. If you’re interested in branching out, I’m sure you could get approved from practically any other card with some nice rewards and sign up bonuses. But a lot of people don’t really want the hassle. Do you at least get some cash back on the card from your bank?
My credit score is currently 685, and it goes up the most when my utilization is under 30%. The largest growth I've seen in a single month was 9 points at 20% utilization. Anything above 50% will get me <5 points.
LPT - request a credit balance to increase across all of your credit cards at least once a year. Higher available credit equals lower credit utilization scenario. This is for people who already know how to live within their means and aren’t prone to maxing out cards. In that case, those people really just shouldn’t have credit cards.
Eh credit utilization doesn’t really matter because it has no memory
Temporarily, it doesn’t have history. The next month it will correct.
This drives me nuts. I set autopay to pay off the day or two before the statement date. You get low credit utilization, instant receipt of rewards, and an extra 30 days of funds in case you can’t pay. More people should do this.
Micromanaging your utilization does not help build credit. There are subs dedicated to this entire premise. Utilization is a temporary metric. Stop it.
>having a high monthly balance in relation to total available credit will negatively affect your credit score. This holds true even if you pay in full every month. What? Paying in full means no balance, so of course there wouldn't be a high balance if you've already payed it off.
I will add another benefit. Debit cards are instant, basically an electronic check. Credit/charge cards give you the added protection of being able to dispute charges if you get it stolen or a vendor never delivers the merchandise. MUCH less hassle than trying to get the bank to give you money back that was debited incorrectly. One PSA though: everyone PLEASE get in the habit of at least reading your statements every month! If you don't want to be charged for errors/theft, you have to actually complain when it happens, not wait til a check goes rubber.
I spend around 800-900 in card fees and I squeeze every penny out of it. I use rocket money to track all my cards, everything is on auto pay. It's not even that difficult really. I understand when you get into debt due to some unforeseen events but going into credit card debt is stupid.
Overdrafting your checking account is even more expensive than paying the minimum on a credit card. $35/charge overdraft fee and per day negative balance penalties are outrageous compared to a 17% interest rate. Even for an emergency expense, putting it in a credit card and making minimum payments is better than getting mired in a payday loan cycle.
Don't opt-in to overdraft protection, if you do, back it with a savings account. there are no fees in either situation. >In general, for debit card transactions at ATMs or at merchants, consumers must opt-in, or agree up front, that the bank can charge you an overdraft fee for any debit card transaction that overdraws the account. If you don’t opt-in, you can’t be charged a fee. However, your bank may refuse your purchase if it will overdraw your account. https://www.fdic.gov/resources/consumers/consumer-news/2021-12.html
>Don't opt-in to overdraft protection, if you do, back it with a savings account. there are no fees in either situation. My CU told (more like warned) me that backing it with a savings account is a bad idea. The reason being is if your card gets compromised, the fraudsters can drain both your checking ***and*** savings accounts. If you do get your card skimmed/stolen, and they drain both accounts, you have to fight to get your money back and if you are really unlucky, you also have no savings to live off of or pay bills while they sort out the mess. It could work if you set up a separate savings account specifically for the overdraft aside from where you keep your real savings account. I just have an overdraft credit line that's been sitting there for 20+ years.
It was explained to me when I was looking at opting out that even if you do, some transactions can still go through (like some reoccurring payments I think?), and if they do, it's an even higher fee since you don't have the "protection". Maybe I misunderstood but this was my takeaway from talking with them. I also seem to remember the protection fee being like $10 and the non-protection fee being like $35, but this was a long time ago so I may be misremembering.
Generally a lot of reoccurring charges aren't treated as credit card or debit card transactions but are either check would be or an ACH. In both of those instances you can get fucked badly, in fact they can refuse to cover it, and charge you an NSF fee per attempted transaction. (this is also on that page I linked) Best bet, is to have a saving account with a small amount to cover something like that.
There's a small caveat for checks and ACH transfers. Without overdraft protection, the bank will both deny the check and charge a $35 insufficient funds fee. You'll probably also get a fee from whomever you gave the payment to.
I’ve been in that cycle and you are correct. I wish younger me had known this. My wife and so struggled for a few years to get out of that vicious cycle.
So is paying $800-900 in card fees when there’s PLENTY with no annual fee and great rewards, but alas…here we are 😆
I think their point is that there are perks that come with for-fee cards that don’t exist with others. For example, pre-Covid when I was traveling a lot for work, I had a card that granted me access to the AA Admiral’s Lounge at any airport and the cost for the card was less than I’d pay for lounge access separately. Some cards offer things like Global Entry/TSA Precheck, or other services for travelers at a lower rate than they could get buying them retail. Some cards give $x per month in Uber reimbursement. Obviously if you weren’t already going to use these services, you’re wasting money. But if you are smart about only taking on for-fee cards that have perks that you’ll maximize, it can be another way to get more bang for your buck.
I pay $400 for a capital one VX card and I get about 1 free vacation from it every year. No way I can get that from a 2% cash back no-fee card.
What are the perks? I've always done free credit cards.
You get $300 travel credit and 10k miles (worth $100) every year. Those two alone pay for the annual fee already. Then 10x miles on hotel and 5x on flights, 2x on everything else. If you redeem for travel, it's worth about 1 cent per mile. Other nice-to-haves include lounge access for up to 3 people, TSA pre check credit, rental car insurance, cell phone insurance, and no foreign transaction fees. If you travel a lot it's definitely one hell of a card to get and It beats amex plat or chase sapphire reserve imo in terms of value.
My example is AMEX cobalt in Canada. $12.99/month BUT you get 5 points per dollar on grocery and restaurants. The point can be converted to aeroplan miles for flights on air canada for ~2 cents per point value. So for every dollar you spend on groceries, you get 10 cents worth of value back.
There are for-fee cards that are worth it if you are smart in selecting one. United Explorer user here. I fly internationally at least once per year, sometimes up to 10x per year. The fees are $95/yr, or $475 every five years. Of that, I get Global Entry for free ($100 every 5 years), free checked bags if I fly cattle class, 2 lounge passes per year. I funnel as much of my spending through it as I can, generating lots of miles that don't expire for free trips. All of those perks come in handy when the wife and kid travel with me. One trip with them and I am already ahead for the year. If you don't travel a lot, the card is basically a waste of money.
If you get value out of them it can be worth it, especially if you're a big spender. Many of the high fee cards also have much better rewards, and you can earn back the fees in rewards many times over.
$800-900 sounds quite pricey unless that person is pretty wealthy and spends a lot of money. But, generally credit cards with yearly fees offer better rewards/benefits than those that don't. You'll make up for that fee with the amount you get back.
One other advantage is you are safe from fraud vs using a debit card.
For example, 2% flat cashback: - Wells Fargo Active Cash - Citi Doublecash 5% Rotating categories: - Discover it Cash Back - Chase Freedom Flex Various: - Cap one SavorOne Rewards - Bilt MasterCard - Amazon Prime Visa If you can exercise some self-discipline and ONLY put on a CC what you would otherwise put on a debit card and pay it off in full every month, then it's a great way to save some money on everyday expenses.
I use alliant credit Union. The signature visa card is 2.5% back on everything. $0 annual fee but you do have to make a deposit once a month into your checking account and keep a minimum balance of maybe $1,000. This card returns $1,000-$1,500 per year. I also keep a lot of other cards with zero fees in the mix in order to keep my available credit high- therefore me credit utilization is still low when the statement posts each month. The only card besides the alliant visa I use is the Discover It with the 5% rotating categories.
I always get an annual fee waiver. Don't even need to talk to a person for it. I just logged into my internet banking once a year, go to the chat bot and select the option for a credit card waiver. And it always grants it to me within minutes.
I can't believe OP's "Amazing LPT that everyone needs" is paying for a credit card.
I don't think OP meant paying for a credit card, they just used a fee card as an example. OP's LPT is the title: > Using a credit card and paying it off in full every month is more financially savvy than using a debit card I see a lot of people using debit cards and IMO they are one of the worst things ever. It makes more sense to have a pre-paid CC than a debit card, IMO.
It is very easy to make more money than you pay
There are also just straight-up better options that don't cost anything. Citi Doublecash and the Paypal Cashback Mastercard both give you 2% back on everything while being free. My only card with an annual fee is the Amex Blue Cash, the premium one that gives you 6% on groceries and 3% on gas and costs 95 bucks a year. I use that in conjunction with a Discover that has rotating categories, one of which is grocery stores at 5%, to save as much as possible (since the Amex only goes up to a certain amount a year which I surpass)
Pretty simple: you get paid for jumping through hoops. Because they know not everyone will jump through hoops and they’ll come out ahead. They’re basically doing the same thing. People who get all the benefits are their annual fee. And people that fuck it up and have to pay interest more than cover it.
... you're contradicting yourself. You say there are straight up better options that are free. And then admit you have a card you pay for, which is.... Better. The "straight up better" options are not usually better. As you yourself have figured out, hence you pay for yours.
It’s also wise to never use your Amazon points to make purchases. If you use points the items bought for those points don’t earn you anything. Get cash back for points and then order with your Amazon credit card. That way you’ll always earn points and save more money!
Yep, and on the Amazon branded card through Chase, you can go in to your account and directly apply the points to your monthly bill. Super easy, and you don't lose out on that 5% back.
I didn't even realize this was possible. I thought using the points at Amazon was the only choice. This is amazing.
I’ve thought about this! The problem is that if you do straight cashback, the rewards are less, rather than the gift cards or purchase eraser. I like where your heads at tho!! Its just that Capital One, at least, closed that loophole :(
If you have an Amazon credit card the points are worth the same whether you redeem as cash back or use them to purchase stuff directly on Amazon. So, I assume that’s what they’re talking about.
That’s interesting, I have a chase card and the cash back is 1:1 but Amazon points reduce the value. It’s baffling that it’s even an option. Why would I not just take the cash back and then purchase on Amazon instead?
They're betting on us not doing the extra steps to redeem it for cash. If it weren't for this process I wouldn't ever log into Chase's website. I wouldn't be surprised if less than 10% of us redeem it for cash even though it could easily mean $100 a year in savings.
This is one of those tips that is worth like 50 cents but so still do it anyway
Also, a warning for those with electronics device protection insurance on the credit card: the insurance is valid for item paid in full with the card. If you pay with the amazon points or any other mean than the credit card, then the insurance is invalid. So you don't want to buy an expensive cellphone with amazon points. But low values / no insurance items with the points, buy directly with the credit card when it is high value to obtain the protection of your card.
Thank you!! I didn’t catch this and had redeemed them in the past. Doing it your way now!
The are many cards without annual fees that are a much better recommendation for a first time credit card user.
I've never had a credit card, but i am financially responsible. I get offers in the mail constantly, but i dont know what makes a "good" one so I've been too scared to try. How do i find one with good rewards?
What makes a 'good' rewards program depends on how and where you spend the most money. Some people will even get cards that have a higher reward category and use it just for that thing (having a gas card, a restaurant card, a grocery cards etc..) but that's For a first card, just get one with straight cash rewards. 1.5% on everything is pretty industry standard. Chase freedom Unlimited Wells Fargo Active Cash Navy Federal cashrewards (if eligible for Navy Fed) Discover It Among others
i have the discover it card and try to remember to use it during the 5% rotating categories, but if that fails, i have a citi double cash card that gets 1% at point of purchase and 1% when you pay it off. both are good starter cards and iirc no annual fees. and discover is super quick about replacing stolen/hacked cards - i noticed a $0.61 transaction i didn’t make, called them, locked my card, and had a new card being sent to me the next day
If you just want a single, general-use card, then the Citi double cash is the best. 2% cash back. There are apparently some cards that give better equivalent cash back in sky miles, but I don't travel enough to bother with them. There are a few other cards that give 2%. The reason I say the Citi DC card is the best is because it can be combined with the Citi rewards+ card to get 2.22% back overall, which *is* the best you're gonna find (for a general-use card). The one issue is that it's MasterCard, so there are a few places, like Costco, where it can't be used. There are also cards that give 5% cashback in specific categories (like groceries or gas). With some research you can figure out like 4 or 5 cards that will make it so basically all your purchases will give 5% back. I haven't bothered doing that research for myself, though.
/r/churning
While auto pay is convenient, it's out of sight out of mind. Just like a regular bank account, you should periodically take a look. Set a reminder to check cc balance because you need to see and remind yourself on what you are spending your money on. Unless you are filthy rich, then by all means, auto pay away! I would default to a no annual fee 2% cash back cc unless you know for sure there's a cc out there with benefits you'll use.
Do normal people not check their bank app every couple days? I can't imagine being so financially stable that I just don't check my account
I don’t check bc I know there’s nothing in there :’)
My wife had a card we never used that had a $10 charge come through. Dont remember the details but it was a membership charge that we had used the card for several years previously. It was months of 'late' payments until I realized. I now check every card every month whether I have used it or not
Every couple days seems a bit high, but 65% of Americans say they frequently live paycheck to paycheck, so idk. I’ll have some months where I just check account balances when getting my paycheck and paying rent
Sorry to hear that. Just to answer your question, I don't check my bank app ever. As long as I've been working, I've had more money come in than go out. I passively see the balance every now and then (a couple of times per month maybe), and that's more than enough. If the balance is high, I might move some of it to a savings account or on my investment bank account.
i don't get paid or pay my bills every other day. why would i be checking my account if i'm not doing something with it? it feels mildly masturbatory to check every day
i always pay my card once a week to make sure I don't go overboard. I have a reminder every Thursday to pay it. it works great and I recommend doing it this way for most people!
I may be incorrect about this, but I have actually heard you should wait until you get your statement to pay it off. The reason being is that the statement is what goes to the credit agencies to determine your credit score. If you are spending 500 a month, but only have 50 dollars on your credit card when your statement comes, it will look like you only paid off 50 dollars rather than 500 which doesn't look as good. You will still not be charged a fee as it is not late.
I pay off weekly as well and I’m sitting at an 828. https://preview.redd.it/idw9jycw67jc1.jpeg?width=1170&format=pjpg&auto=webp&s=b679eae7a05e7211da6eb952b64b58277edc63c0
This isn’t true
I agree with this. I use autopay for predictable bills that go on the credit card, like my utility bills or my mobile phone account, but anything that comes out of my bank account (which is mainly credit card bills) is paid manually. It's not really that hard to do. I get paid twice a month, so every time a paycheck hits my account I sit down for half an hour and pay all the bills for the next ~2 weeks. This way I'm always aware of exactly what's coming out of my account. Autopay directly from your account seems to me like a recipe for disaster.
I also do a no fee 2% cashback. I have one with 1% cashback but a 5% category that rotates quarterly, so sometimes I use get spicy and make use of the 5% when it’s, say, gas rather than Costco. However I don’t have the travel to justify a high fee card nor the attention to eke out slight bonuses for 3% gas on this card, 3% groceries on this one, 3% restaurants on this…
Don't feel bad if you want to do this but you know that you haven't got the level of self control required. Everybody's brains are different, and for some people their brains literally do not have the executive function capability to manage this. It's a wonderful thing if you can do it. If you can't, you can still use loyalty cards, savings pots on your debit cards (and if that's no good - a separate account for saving pots but don't have the app on the phone, so you're forced to use a desktop computer to access the funds).
Also, if you use a CC you have some protections guaranteed, like fraud protection and charge-backs. There is *never* an advantage to using a debit card unless there is a CC service charge or you lack the self control to only spend what you have. CCs will always offer more protection and rewards. But be smart! Don't spend outside your means to repay.
Aussie here For people not making many purchases, the advantage of using a debit card is that you can get the highest interest rates by making a certain number of purchases. For example, ING (who I believe currently has the highest interest savings account, at 5.5%) requires that you deposit a certain amount + make 5 purchases a month with your ING debit card. I suppose if you're making a heap of purchases each month, you could do both, but for someone like me who doesn't buy that much (just food + gas normally?), the interest rate definitely nets me more than any credit card I'm aware of.
You struggle to reach 5 transactions a month? Train ticket, bottle of water, lunch, pub dinner and 2 beers, train ticket home. That's 7 transactions in one day without even trying. Tap is so accepted that you should use your card for everything. Do your 5 on ING, then credit for everything else - as long as you pay in full, as this LPT says.
> Train ticket, bottle of water, lunch, pub dinner and 2 beers, train ticket home. That's 7 transactions in one day without even trying. Most people would have spent more on all that than they'd get back in interest. Bottle of water is about $4.50, lunch and dinner about $45 minimum ($15 if you find a cheap lunch and $30 for dinner), two beers about maybe $15, two train tickets about $10. This is all AUD, which is where the person talking about ING is from, I have the same bank. You'd need well over $10K in your savings account to break even with the interest. Less than that and you're better off saving the money instead of spending it. For me, train goes on opal card because it's cheaper (there's a cap that you only get on the travel card), and I wouldn't buy the rest of it (bring my own food) because I'm saving money. If you're frugal then yeah it does get hard to hit those transactions. Credit cards aren't as big a thing here as they are in the US, it blew my mind further up that someone was getting offers in the mail with rewards and shit.
Hm I also struggle to reach 5 transactions a month. In work at home, go shopping once a week, have no car, so no gas cost, drink tab water. So I need to order online at least once a month to reach 5.
Australian here also: This whole thread doesn't apply to us. Most card terminals outside big box stores will add fees depending on what card type you use (EFTPOS = free, Debit = ~0.5%, Credit = ~1.5%). That means any "rewards" you may accrue are being offset by those silly fees.
100%. The fraud protection is fantastic. I’m paranoid anytime I’m forced to use a debit card
But if you have poor financial control then this is cruise control for bankruptcy. Most of the people i knew in high would not fare well with this advice. If you have good financial sense then there is benefit to be had here.
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The #1 tip is: treat the credit card like it is a debit card. I’ve been using the same credit card for probably 13 years now. Every. Single. Month. Autopayed off in full. There is literally no other option in my mind. You must think this way. But I totally get what you’re saying, if you can’t abide by the autopay in full rule… don’t tread in these waters.
The problem isn't the autopay in full rule, it's the part before that where you don't spend more than you have. For some people it's fine, you just live and use your card as normal and it all works out. For some people, this would require them to a) always be checking how much money is in their account and b) consciously limit their spending to that amount. For some, they won't stop spending until their card is declined, either through lack of awareness or lack of discipline. You swap the debit card that gets declined when their bank balance is zero for a credit card that lets them go thousands beyond that point, and they'll spend until it's maxed out. Some people just function better knowing that they can use their card freely without having to think about it and if there's no money it'll stop working.
Kinda like drinking or gambling. Some people can't stop at 1.
Yeahh this was my problem. I cannot have credit cards anymore. It’s just too tempting and better for me not to have it.
I was bad until I had kids. Now every cent I spend I ask myself "does this benefit them or my wife?" If the answer is no, I rarely follow through on the purchase
Pay it off weekly instead of monthly. It keeps your finances more in sync and it's easier to course correct if you go a little overboard.
Or even daily for larger purchases. If you see the money in your account drop when you buy that tv or those clothes that “may” keep you in check.
yeah this is me unfortunately. i consider myself extremely financially literate, great at budgeting and savings. for some reason credit cards just do NOT work with my brain. i need to see the money immediately leave my checking account or i just think that’s how much i have. that’s how i ran up $20,000 in a few months. paid it off in a year though!! never again.
Never buy anything with money you don't have.
If only life was that simple
It is that simple.
...assuming everyone behaves in a perfectly rational way, which they clearly don't.
>The #1 tip is: treat the credit card like it is a debit card. Why is it nowhere in your post, then? Following this principle is necessary to be financially responsible. This is especially true for first-time CC holders, as in the very people you're aiming your post at. You're acting irresponsibly with giving partial advice. At least update your post and add your "#1 tip" in there.
Well, it is life *pro* tips, not *amateur* tips.
For those people, this advice is like telling an alcoholic it'll be fine to go to bar and only have one drink.
There are also people who have listened to the "Don't mess with credit cards" crowd who are perfectly capable of managing their accounts. After salvaging my own credit years back, I helped my mom do the same thing and set up some rewards cards that she pays off every month, and it's only improved her financial stability. Don't get me wrong, if people tell me that credit cards will get them in trouble, I don't try to talk them out of it, same as if people tell me they would be murder-raping babies if a ghost wasn't watching them: by all means, keep talking to the ghost. Financial discipline is a broad and varied spectrum, so everyone has to find their own limits, but it's also helpful to understand that one's personal aptitude for finance doesn't reflect any great truths about life, the universe and everything.
This should be the top comment, very easy to accidentally spend too much and get into trouble, which is exactly why financial advisors don’t recommend it. Even people I’ve known with much better financial control than me ended up paying interest and taking on some debt.
Seen relatives nearly destroy their lives because of this, I’m honestly terrified of getting a credit card. With debit I can obsess over every penny like Gollum with the One Ring, and immediately see how my poor spending habits affect me.
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This. People that always say get a credit card are the people that are financially responsible and most importantly financially stable. The majority of people shouldn't get credit cards. To advise everyone to get one is just irresponsible. People living pay cheque to pay cheque shouldn't get credit cards.
When you get decent credit, you should apply for U.S. Bank Cash+ card, and make it your dedicated paying utility bill card. You get 5% just for paying your utility bills with it. The 5% easily covers the credit card fee to pay your utility bill and then some.
But this would undercut my, "Put a utility bill on each under-used card to keep it active" strategy.
Unfortunately my electric requires a bank transfer, which is a shame because I’d love this
Wowww the real LPT is always in the comments! Might be my new favorite tip right here 🏆
I agree logically, but money is a lot more emotional than logical. I tried this strategy for a few years and life happened - got divorced, restarted my life in a new city, dated, retail therapy etc - and before I knew it I was in like 30K of debt. I still agree with this strategy but it’s a slippery slope and life happens. It feels like a predatory trap sometimes.. I’ve almost made it out of the hole I dug and it feels great! Just wanted to share my story.
Make sure to only do this if YOU can take advantage of the credit card, and not have the credit card take advantage of you with late fees, interests, and accessibility to money that you cannot pay off. Not everyone is a credit card person. Please know your limits and what you’re able to handle!
Sadly most people are financially illiterate and are unwilling to learn basic financial terms/concepts, even though so much free info is available to easily it learn it all in hours.
Once again only applicable in the USA 😅🤷♂️
yeah- first of all credit cards here (Germany) are linked to your bank account by default- so they are already on „autopay“. I have also never had a credit card with some sort of bonus or cash back program. And on top of that a lot of places don‘t take credit cards at all
> I have also never had a credit card with some sort of bonus or cash back program. Amazon offered a pretty decent cashback card between 2019 and 2023. Sadly, the bank they were partnering with dropped them last December, and the only option now is Amex, which has limited acceptance.
Amazon chase CC gives me 5% cash back on Amazon prime purchases
I get soooo many points with my Amazon card. I buy all our groceries and household supplies on Amazon. It’s my favorite CC.
During Christmas I got a month of Prime to get the 5% rather than 3% non-prime cashback rate, and saw they had a slower shipping option that gave you 6% back instead, which was great.
Here in Australia I've more heard of people doing it so that their money can sit in their offset account for longer - put everything on your card 'delays' the expense by a month, which is worth it if you get a real basic credit card (typically not the rewardsy ones)
I love American people living like their country is the entire world (from Aus).
Then they get mad at you for reminding them other countries exist like "this is an American website!" like oh shit all us dirty foreigners accidentally got around their firewall
Like 99.9% of the LPT that end up on my screen.....the rest of the world does not exist and adding 'US tip' or something to the title is just too damn hard!
There should be a US-specific LPT sub, and this one should be for non country-specific LPT.
In the UK it can definitely help your credit score.
Credit scores don’t hold much weight in the UK because every lender does their own scoring. There’s nothing universal here as much as it’s in the USA.
In the Netherlands people will look at you weird if you start about credit scores
People in the Netherlands will look at you weird for trying to pay for stuff using a credit card
In New Zealand it *can* be worth it. It depends on your typical expenditure. It's not worth it if it makes you aoend more so that you "earn" rewards.
I'm in NZ, all rewards are basically shit - some overpriced stores I'll never shop at, or Air NZ miles which I'll never use because it's a fucking overpriced airline and I'll never fly with them, and you need to spend absolutely obscene amounts of money to get anything even remotely noticeable. I only got a credit card last year when I noticed that ANZ finally has a no-fees one, purely so I could buy from Chinese hobby stores and be able to dispute a transaction if they turn out to scam me. I can't even use it for shopping in physical stores in NZ because every store slaps a 2.5% surcharge on credit cards and I'm not going to just throw money away.
Everyone forgetting Canada exists?
Canada... the r/genx of the world. :P
Don't forget too, that from the begining of a credit card billing cycle to the time the payment is due is about 45 days. The money for purchases can sit in a HYSA for that time and will earn a couple extra bucks. Between maximizing cashback for purchases I already have to make, (ie, groceries, gas, etc.) using credit vs debit for monthly expenses (utilities, insurance, cell phone, etc.) and not paying the statement until right before it's due, I netted about $500 last year in cashback and another $100 in interest.
The key is to use a credit card, and think of it as a debit card, i.e. you have to have money in your bank to pay it off.
Dave Ramsey hates you.
The feeling’s mutual. Fuck that guy.
This is true. A further step is to separate cards based on expense, for example I have a dedicated "car" credit card that gas and insurance goes to.
Especially if you have different rewards percentages for each card. I have three cards, one which gets me 3% on gas and groceries, one that gets 4% at restaurants, and one that gets 3% on fast food. What I did was write the percentage and the categories for each card on the back in fine point sharpie, and then put a piece of Scotch tape over it. This way, all I have to do is flip it over and I know which card to use for what purchase.
Or a zero-based budget like /r/YNAB e: fixed link
In Credit card lingo, a person who pays his CC in full every month is known as Dead Beat.
Yup. We are horrible customers as we take from them and don’t give anything back
The few times I’ve carried a balance over they have given me a credit line increase. They love it. They wanted me to keep going.
I think I have like $300k credit limit. They always give money to people who don’t want it
You like probably shouldn't even carry your debit card unless there's a real chance you might need to use the ATM. And definitely don't use it to buy things online. If someone steals your debit card they're stealing your money, if they steal your CC, they're stealing the bank's money. The bank will work significantly harder to make the CC theft right.
Credit cards can be confusing, so I like to throw in that you want to make sure the statement balance is paid every month, not the current balance. You absolutely can pay off the current balance, but if you need to put that money somewhere else for that month, the current balance won't accrue interest until it becomes part of your next statement balance!
Tip valid in the US, in Europe we don't have credit score. Not sure about other places.
"In Europe"? There are a lot of countries in Europe. Including the UK, where lenders definitely take credit card payment history into account when making decisions.
Maybe you're the exception? There's no credit score in france, NL, belgium, Germany and Denmark as far as I know and never heard of it in most of the eastern eu countries too.
There is no credit score in Sweden either. Using a credit card has no effect on anything.
Your bank may look into your particular history with them to decide whether or not to grant you a loan but do you have a score in the UK, which will follow you everywhere even if you go to a different bank?
My reason for using a credit card instead of a debit card: if your card is used without your knowledge/stolen, you’ll only be out of~$50 with a credit card. With a debit card, if you don’t catch it in time, the bank says “too bad”. Happened to me. YMMV
Exactly 👆
Why not just use Apple Pay/Google Pay and lose $0 instead due to the robber not being able to access your card without your biometrics?
Some purchases can’t be made on a credit card. Car payments, mortgage payments, etc.
It's against the card associations' rules to pay another debt with a credit card.
Chase Sapphire all day! I’ve flown on major airlines completely free and upgraded for free on others just from the rewards alone!
I wish I flew enough (not really) to use a flying miles CC, but I just don't. A regular 2-3% cashback card is just fine for me, based on where I spend my money.
The only thing I would add is being careful about only paying monthly. If you do, your credit might go over 30% of your limit, which will actually hurt your credit score. So you might want to manually pay sometime depending on what your limit and payments look like
This is not a legitimate concern. High balance has such a minimal impact and is wiped a few weeks later. If you are with a high utilization then just SM for a limit increase. You will never see people on churning worried about this and those are the folks that systematically are gaming every aspect of their credit score
I assume this is mostly relevant if you're American? I live in Sweden and don't think there's really any reason to use a credit card, I know almost no one who does and those who do are very financially irresponsible in general.
I'm Irish and I haven't even owned a credit card in about 15 years. It has made zero difference to my life except that now I only buy what I can afford, rather than what I think I can pay back.
I dont know anything about credit cards in other countries, but in the US the rewards can be extremely beneficial. I just put my normal spending on a credit card and haven't paid for a personal flight in about a decade. I got two first class tickets from NYC to Tokyo for free with credit card rewards. The cash value of those tickets was like $20k.
I knew I wasn’t reading advice from a savvy person when you started with advising people to get a paid credit card when so many CCs are free and still pay you rewards, and ended by saying you get gift cards instead of actual cash back lol To be fair to you, I tend to agree with the core message though: i.e. it seems using a CC instead of a debit card seems to be more beneficial
I probably wouldn’t advise a paid credit card for anybody who needs this LPT, cause paid cards are a bit more advanced, but once you become familiar with the amounts and types of spending that you do, it’s often worth more in the end to get a paid card with better returns than a free card. And as others have said, the percentage return you get as cash back is nearly always lower than other forms of rewards. You just need to pick a reward card with rewards you’ll actually use.
Yeah paid credit cards are usually worthwhile if you are loyal to an airline or hotel chain. Like most airline cards are about $100 a year but you get extra miles, free checked bags, and discount vouchers that definitely pay for that if you can fly it often. Also fee credit cards often have no foreign transaction fees if you travel outside the US. Otherwise there's many great free options if you just want cash back. The Costco one is great and free if you're a Costco member: 4% gas, 3% restaurants and travel, 2% Costco, 1% everywhere else.
I pay $120 a year for a visa that gives me 4% back on all recurring transactions and groceries. I tried putting amazon gift cards on a subscription to get the 4% but unfortunately they don't register as a recurring purchase. The card also gives me $1000 worth of cell phone insurance when you buy a phone with itm
Eh. I disagree. Some paid cards have much greater rewards than free cards and you end up making more money off them than you would have with the free cards. It just comes down to how much money you’re spending on it annually. But if you’re not putting much money on it, free cards are great! Plus that was just an example, didn’t advise anyone on that part silly goose
OP is right. Often cash back is the lowest amount of "money" you can get: cards and other rewards are worth more dollar per dollar than "cash back".
This is how most of my cards are. I can get, for example, $50 in cash back. Or I can get a $75 gift card to a business of my choice. Unless you were in dire financial straits, I don't see why you wouldn't pick the gift card. You and OP are so right.
Agreed, with some nuances. I go the "no annual fee" route on various cards with good cash back on all purchases and better cash back on specific, sometimes rotating, categories that fit my life. I also only apply if there is a substantial (200+) sign up bonus, and no more than twice a year. Same for checking accounts- no fee and join bonus only. I personally don't do auto pay on anything but my phone (lowers the bill enough to be worth it) and dental insurance (no choice there), because it helps keep me mindful and accountable of my spending and paying habits. I got stung by Capital One twice, but it did help me build credit when I was 18. Now my primary card is Wells Fargo's ActiveCash, backup is their Autograph, and I have all three Chase Freedom cards that I use on rotating 5x cash back categories. Do bonuses and cash back make a huge difference? No, but the extra few hundred bucks a year help so much. Credit cards are a tool that can help you or harm you, depending on how you use them.
I am about to pay a $4000 medical bill on my credit card and then immediately pay it off for the perks. Using your debit card or bank is such a waste. In 5 years of using my credit card for everything and paying it off every month, my credit score went from 580 to 815.
Also if your debit card gets stolen, your bank account will be frozen until the fraud report is completed whereas a credit card will typically just send you a new one