We're Still Using Credit Cards, But Not Adding To Our Debt
Posted on February 21, 2007 by Him and tagged credit, rewards
Last month, we paid off all of our non 0% credit card debt. We're currently on track to pay off the rest of the credit card debt, which is at 0%, by the end of the year. So we thought we would celebrate in the most logical way possible: by getting another credit card.
I applied for, and obtained the Citi AAdvantage card. The rationale: to pay for our honeymoon flights.
My company gives us the freedom to book our own travel whenever we need to go somewhere for business. Since Her had a ton of American Airlines miles from her college days, I decided to book all of my travel using that airline as well. Since I started this job a little over two years ago, I've racked up about 15,000 miles.
On this card, every dollar spent is equal to a mile. Once we spend over $300, we get 20,000 "free" miles. Also, this card will give me one complimentary companion domestic flight ticket when I book a American Airlines flight with this card. Since I'm going to go on a few business trips during the summer, we thought this would be a great way to get a very cheap vacation.
In order to use this card wisely (responsibly?), we've made a couple of rules for ourselves, at least for now. The first order of business was to open a joint savings account at Chase, where we already do our checking (of course I waited until there was a $25 bonus for opening the account). We opened up this savings account so that every time we use this card we could go home and immediately transfer the amount we charged from our checking to the savings account. This ensures that we'll have the funds to completely pay off the monthly bill.
Next was to determine out what expenses would go on the card. We decided at first that recurring monthly expenses would be automatically charged to the card: cell phone, cable, phone/internet, insurance, etc. We figure that since we have to pay for all of that stuff anyway, why not get the miles?
Finally, we determined what else can go on the card. Our answer: wedding stuff. Same rules apply here: as soon as we charge something for the wedding we go home and transfer money from our online savings account to our "holding" account.
Not all credit card use is evil. Just irresponsible use.
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My wife and I do the same thing, except we don't travel much, so we have a Chase Perfect Rewards card (1% on everything, 3% on gas).
We have the same attitude: "If we're buying stuff we already have to buy anyways, why not get rewards (cash back) for it?"
We earn about 25-35 dollars a month just in rewards.
Nice blog, my wife loves it.
Mike | Feb 23, 2007
While taking advantage of the rewards offered by your credit cards is a smart idea, just remember that as you improve your credit, constantly using a credit card will limit how high your credit will go. I use my AMEX exclusively and pay it off every month to build up rewards points, but now as I'm preparing to buy a house the high amount of revolving debt is keeping my credit rating from going higher (and thus making it more difficult to secure the best interest rates and terms on a mortgage).
phil's wife here. I posted a specific blog about our collected credit card rewards. and i do love your blog.
http://philskaren.blogspot.com/2007/02/another-graphfrom-world-of-pf-personal.html
small to start, but free!
Bob | Feb 25, 2007
Nice blog!! I just read about you in the New Yorc Times (sorry, that letter doesn't worc on my laptop and I've decided not to spend hundreds of dollars to replace the laptop).
Anyway, you seem to have this debt problem well in hand. Once you stopped paying credit card interest you were on the road to recovery. Now all you have to do is fight and defeat the negative side of our over-consumer culture -- the main clue is this: You don't really need all the stuff that marketers and the media (run by marketers) and other people might make you think you need! Once you set up a low-consumption lifestyle finances are a breeze.
Good Luck, and you see after all there is a work-around way to put in the k that doesn't work on the old laptop. It just takes a little resourcefulness.
As an added bonus to this, if you have online banking that allows free bill pay, when you make a purchase via your rewards credit card, keep your receipt. When you get home (or next time checking your online bank) go ahead and cut a payment to the CC company for the amount of the purchase. You get rewards and a balanced cash budget ;)
Nice blog by the way!
Sarah | Feb 21, 2007
I have a NWA Worldperks card that I do the same with - all recurring expenses and groceries go on the card.
Great idea about putting the money in an account after purchasing something. I tend to buy gifts with my card, but haen't yet figured out the best way to budget for the bill when it comes. I will try it!
You're right, credit card use isn't always evil. You can use them toward your advantage. Between my Worldperks card and other work travel, I've accumulated enough miles that I've redeemed them for 3 domestic flights and 2 Carribean flights, and I didn't pay a penny in interest!
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