What is the best uses for a credit card?
Rochester, MN · Member since 2018 · 79 posts · 36 votes
What is the best uses for a credit card?
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Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
7yWe find ourselves being 'one of the few Americans' that do or don't do many things as well, Jay. Not just in the no credit card discussion..
For instance, my 13 yr old has mutual funds, a bank acct and a debit card. Money he earned himself. Ask him which will be worth more in 5 years- an iphone 10 or his mutual fund? Ditto for my 17 yo + 4 years. One of few Americans is right!
34 Replies
- Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes7y
@Alec McGinn I use Discover cash back card for normal purchases which gets me 1% on everything and higher on bonus categories. I use my Costco Visa for gas to get 4% back. I only use my credit card for things I would otherwise buy with cash. Every purchase goes on a cash back credit card and I pay off the balance every month. The only time I don't use a card is for purchases where they charge a fee for using credit, because there is no incentive then.
I have used other reward cards in the past like airline rewards to get point bonuses. These are usually fine for the initial bonus, but then I cancel the cards. I have gotten the Delta welcome bonus three times. After it has been cancelled a year, they let you go back and get the welcome bonus again.
Playing these games with opening and closing cards can hit your credit negatively, so that is something to be aware of.
People need to be careful with credit cards. Studies show that when using credit cards you will spend more than if you used cash. That is why people like Dave Ramsey promote a cash envelope system for debt pay down. No matter how much self control we all have, there is no doubt that using a cash system will result in lower spending.
- Gillette, WY · Member since 2018 · 44 posts · 19 votes7y
I've recently spoken with a few quote unquote experts in credit and credit cards. Although it is wise to pay off your credit cards every month, not carrying a balance to the next month could negatively affect your credit. I've been told that it is best to carry at most 30% of the the cards max. Also once you open a card it is good to never close the account. There are many ways credit cards can help you in real estate. Although I don't advise using them for rehabs per say, If it were my only option to get the job done and I had multiple exit strategies, Id give it a shot. Different people have different risk tolerances. A lot of times you can utilize a 0% interest offer if you were to transfer your balance, usually for a 3% transfer fee. It counts as a pay off and essentially you could have free money for a certain period of time. Usually a year. You have to be very careful though, because it's easy to let things get out of control. If you have the discipline to control your cards they can be a great asset to your tool box. I hope this helps. Have a great day.
- Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes7y@Daric Myers. When you say carry a balance are you saying not to pay off your credit card in full each month? If that’s what you mean, that’s really bad advice lol
- Gillette, WY · Member since 2018 · 44 posts · 19 votes7y
I'm certainly not an expert on the subject, but I've recently asked similar questions to so called expert investors in my area. There are so many ins and outs to this question. I think it all comes down to risk tolerance.
- Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes7y
Originally posted by @Daric Myers:
I've recently spoken with a few quote unquote experts in credit and credit cards. Although it is wise to pay off your credit cards every month, not carrying a balance to the next month could negatively affect your credit. I've been told that it is best to carry at most 30% of the the cards max. Also once you open a card it is good to never close the account. There are many ways credit cards can help you in real estate. Although I don't advise using them for rehabs per say, If it were my only option to get the job done and I had multiple exit strategies, Id give it a shot. Different people have different risk tolerances. A lot of times you can utilize a 0% interest offer if you were to transfer your balance, usually for a 3% transfer fee. It counts as a pay off and essentially you could have free money for a certain period of time. Usually a year. You have to be very careful though, because it's easy to let things get out of control. If you have the discipline to control your cards they can be a great asset to your tool box. I hope this helps. Have a great day.
I disagree. Not carrying a balance month-to-month will not negatively impact your credit. I have paid off the balance on every credit card I have used, every month for 20 years and my credit score has stayed over 800 for years. The credit card company reports on time payments, balance and open credit. I have also opened and closed many cards over that time. I agree that can affect your score a little bit, but if you spread it out, it is pretty harmless. Opening is really worse than closing, because it shows up as a new inquiry. Closing decreases your available credit, so could actually help if you are trying to get a loan.
In my experience the thing that propelled my score highest in my younger days was installment loans on automobiles. Mortgages helped too. The most important thing is to make every payment on time without fail.
- Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes7y
The key thing is to have the iron financial discipline, always, to never carry a balance from month to month. All else is secondary. 60% of Americans cannot do this. I have proven to my satisfaction in the past that I am one of this lamentable group, and that's why my wife handles the money in our family. This has freed us from all kinds of BS.
But once you do establish that discipline by any means necessary, look into travel rewards/travel hacking Alec. Do a search on the terms. Some of the Money Show podcasts talk about it. We've been trying it out for a few months. - Member since 2016 · 13k+ posts · 12k+ votes7y
Asking advice of so called experts is like getting multiple doctors opinions. Keep asking till you get the answer you want to hear.
Sort of like getting opinions on here about use of leverage. Answers are always specific to a individules personal preference.
- Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes7y
Originally posted by @Daric Myers:
I'm certainly not an expert on the subject, but I've recently asked similar questions to so called expert investors in my area. There are so many ins and outs to this question. I think it all comes down to risk tolerance.
I’m very confident in saying that carrying a balance on any credit card month to month will negatively affect your credit score, and cost you a lot in interest. The biggest factor in credit score is on time payments and you are purposely not having those in this scenario. I recommend finding new “experts”.
- Gillette, WY · Member since 2018 · 44 posts · 19 votes7y
Thank you all for the advice. I certainly didn't mean to cause a stir. I was merely passing on my opinion from what I was told. Have a great day!
- Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes7y
You want to have about 3-10% utilization of your available credit.... which might mean carry a balance... but not always. But in reality the impact to your credit is minimal so unless you're right on the cusp it won't matter that much. The worst thing you can do though is max out your cards, that'll drop your score a lot. Even if it's a low limit card and you have ton more money in the bank,,,, don't max out a card.
But back to cards... depends on what you're doing with them. You can do the shuffle where you transfer high balances to low-no interest cards to get low cost loans, you will have to pay fees for balance transfers though.
If you travel, lot of cool ways to get stuff, look into travel hacking. You used to be able to get 2 souwthwest cards and with the spend needed for bonus you'd be able to hit the points needed for a companion pass. There's other perks too if you travel a lot like lounge access etc, but you have to do a bit of planning to avoid paying extremely high annual fees.
If you're into the money back thing there's certain ways to maximize that. One is to buy gift cards for other stores at the grocery store during certain periods. Sometimes you can get 4-6% cash back (generally limited to hard cap $ amount).Then if you're really into it... look up manufactured spend. It's a LOT harder than it used to be, but it can still be done. Basically you run money through cards and the rewards are worth more then the cost of running the money through. It's harder now so def do some reading...
There's also lot of benefits from the cards themselves (visa, visa signature etc) .... but not many people use it or might not have much value from it... - Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes7y
I like the serenity of not having credit cards. I used to have a bunch but paid them off, cut them up and closed them in 2011. To my surprise my credit score increased to boot. Found out last year during a refi.
One better than just not having cc is if you opt out your ss# from financial solicitations. Picture your mailbox being free of financial junk mail. Serenity..
1% or 4% cash back or cattle, I mean travel, hacking couldn't make me go back. My net worth has also increased 4x, as I'm not tempted to buy crap I don't need and can focus on things that matter vs rolling payment dates and my 'rewards'. Peace and wealth. My advice and my experience without.
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Steve Vaughan:
I like the serenity of not having credit cards. I used to have a bunch but paid them off, cut them up and closed them in 2011. To my surprise my credit score increased to boot. Found out last year during a refi.
One better than just not having cc is if you opt out your ss# from financial solicitations. Picture your mailbox being free of financial junk mail. Serenity..
1% or 4% cash back or cattle, I mean travel, hacking couldn't make me go back. My net worth has also increased 4x, as I'm not tempted to buy crap I don't need and can focus on things that matter vs rolling payment dates and my 'rewards'. Peace and wealth. My advice and my experience without.
just curious how do you rent a car without a major credit card.. and a lot of other things require it like checking into a motel etc.
as a road warrior I cant fathom how I could operate without a card.. ?
- Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes7y
Originally posted by @Jay Hinrichs:
just curious how do you rent a car without a major credit card.. and a lot of other things require it like checking into a motel etc.
as a road warrior I cant fathom how I could operate without a card.. ?
We secure rental cars and motels when we travel with our debit cards without a hitch. When they ask for our credit card number, we put in or provide the debit card number. No problem!
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Steve Vaughan:
Originally posted by @Jay Hinrichs:
just curious how do you rent a car without a major credit card.. and a lot of other things require it like checking into a motel etc.
as a road warrior I cant fathom how I could operate without a card.. ?
We secure rental cars and motels when we travel with our debit cards without a hitch. When they ask for our credit card number, we put in or provide the debit card number. No problem!
OK got it.. I am probably one of the few Americans who has never had a debit card and refuses to get one.. I just tear them up.. I still go to the bank and get 1000 in cash when I need cash.. and of course I never get cash advances on my cards. I use the points for air travel and hotels to exotic lands .. that's my reward..
- Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes7y
Most people dont realize that the amount of your utilization that is reported is the number on your credit card bill. So you can pay your bill in full every month, vut your credit report does not show zero. It shows your bill amount.
Even if you wernt using your cards and had an actual zero utilization....the impact on your score for a well diversified credit individual is going to be just a few points lower than some utilization. So who cares if your credit score is 800 instead of 805.
District Invest Group545 Reviews - Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes7y
We find ourselves being 'one of the few Americans' that do or don't do many things as well, Jay. Not just in the no credit card discussion..
For instance, my 13 yr old has mutual funds, a bank acct and a debit card. Money he earned himself. Ask him which will be worth more in 5 years- an iphone 10 or his mutual fund? Ditto for my 17 yo + 4 years. One of few Americans is right!
- Encinitas, CA · Member since 2011 · 191 posts · 252 votes7y
I use the US Bank cash + card to pay utilities on my rentals, primarily water bills. This card has categories you can select each quarter which rebate back 5% up to $2,000 a quarter. I always max out the utilities category each quarter.
Once I max that out, I put utilities on my Barclaycard Rewards world master card which gives rewards of a straight 2 % on utilities.
I also have the Chase Freedom, Discover, and Citi-Dividend cards which feature rotating categories each quarter at 5% rewards. I do track these each quarter and give my wife a "cheat sheet" each quarter for which card to use for her spending.
I also use Chase ink for 5% back on telecom/internet/cable charges, and a legacy chase ink card that gives back 3% on home improvement (home depot) charges.
I also track the promotional bonus offers for airline miles and go for those now and then.
I have a lot of credit cards and I never cancel them, so my available credit is very high and my utilization rate is therefore always pretty low which helps keep my credit score high. As others in the thread have mentioned, ALWAYS pay your balance in full each month.
It does take some time to track, but there are benefits to being a sophisticated consumer of credit if you do a fair amount of spending. It is ironic that under our current financial system, the rewards returns you can get on credit card spending exceeds the savings rate you can get on even high interest online accounts.
- Philadelphia, PA · Member since 2018 · 81 posts · 27 votes7y
There are forums out there...just like BP...that go into a great deal about how to best utilize bank accounts, debit and credit cards to maximize your bonuses, cash back, etc. thepointsguy.com, doctorofcredit.com, etc. It all depends on how much work you want to put into it. It also depends on what you're buying and how much you're spending. As a renovator of 1-2 properties a year, I spend probably 100k on credit cards every 12 months. I have a system of 5-6 cards that I use to maximize the returns. I also "churn" cards (signing up for the bonus) when I have big 5-10k+ expenses. As a lot of people have pointed out, there are cards that earn extra rewards in all sorts of categories (2-5% extra), so try to take advantage of those when available. Chase Freedom, Discover IT have rotating quarterly 5pts/$1 back categories up to $1500 spend. I can almost always buy gift cards where the rotating categories are being offered (e.g. at target, amazon, etc.), so every quarter I am basically spending $3000 to get 15k points. Now here's the next thing, ask anyone who "is in the credit card game," and they'll tell you that redeeming points for cash at a 1pt=$0.01 value is stupid...because you can buy air travel, hotels, etc at a much better value. So those 15k points, if they're chase points, I know I can make them worth at least $0.02/pt, likely more. So the 15k points turn into a value of $300+. This is just the tip of the iceberg. There are a million ways to do it. At a minimum, I would recommend getting a card that earns you at least 1.5pts/1$ on every purchase. There are 2% cash back cards out there, but for me, the 1.5pts/1$ spent is better because I value that at 3% cash back, if not more.
At the end of the year, with a few signup bonuses, utilizing my rotating categories, getting 1.5pts/1$ on everything else, and taking advantage of special promos, I can easily walk away with points that I value at ~$4,000-5,000. But as I said, it's a lot of work, and it's definitely not worth everyone's time. Good luck.
- Bolingbrook Illinois · Member since 2018 · 50 posts · 33 votes7y@Daric Myers That info may be correct, but consider this. I use my card regularly for the cash back points and the balance is paid every month like clock work so I never pay interest. That said, since I use my card regularly there is always a balance on the account (not a past due balance since that is paid when it's due. But the current balance, which is reported to the credit reporting agencies every month). So if my billing cycle is the 8th thru the 7th of each month and I charge 10K from November 8 there Dec 7, I then receive a statement with a payment due by Dec 18th for 10K. In the mean time I continue to charge another 3k on Dec 10 and Dec 11th. The credit card company reports a balance of 13k to the reporting agencies on Dec 16th and on Dec 18th an automatic payment is made for my statement balance of 10k. My balance is now 3k. I continue to use the card and rack up another 11k during the next billing cycle and the process continues. The point I'm making is that credit reports will show a balance on the credit card even though you pay your entire balance for the billing cycle that is due. Hopefully I explained this ok. And sorry for typos. Posting from a cell phone.
- Real Estate Broker · Minneapolis, MN · Member since 2016 · 530 posts · 398 votes7y@Alec McGinn you mean to tell me you aren’t maxing out your Home Depot card yet on....drywall? Haha. Just use mine for small expenses to show usage. Wouldn’t go too crazy with them, especially if you are shopping for financing.
- Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes7y
Originally posted by @Steve Vaughan:
I like the serenity of not having credit cards. I used to have a bunch but paid them off, cut them up and closed them in 2011. To my surprise my credit score increased to boot. Found out last year during a refi.
One better than just not having cc is if you opt out your ss# from financial solicitations. Picture your mailbox being free of financial junk mail. Serenity..
1% or 4% cash back or cattle, I mean travel, hacking couldn't make me go back. My net worth has also increased 4x, as I'm not tempted to buy crap I don't need and can focus on things that matter vs rolling payment dates and my 'rewards'. Peace and wealth. My advice and my experience without.
what kind of crap were you buying on card that you were able to increase your net worth 4x lol
- 7yBjorn AhlbladPro MemberInvestor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
I pay off any CC balances every month except one time; 20 years ago my business partner and I, started what became a successful software business using CC's to fund it till we raised equity investment. It is risky and I do not recommend it; If you miscalculate and can only pay the minimum you could be inviting financial disaster that might stay with you for a very long time. I you are disciplined and pay off the balance every month CC's are a handy tool. Debit cards are another story, I do not see the point of them at all.
- Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes7y
I use them for convenience and points. I cant remember a single time in my life I have ever carried a balance into the next month. And I have close to perfect credit. So there is no truth to the statement that you have to carry any balance. Thats just giving money away for no reason. I use one single credit card for almost all my spend. The Chase Sapphire Reserve gives some amazing benefits and since I travel a lot I put my business and personal spend on it and collect thousands per year in cash back. I have never thought of credit cards as anything other than a convenient way to spend money I already have. Never as a source of credit. I also distrust debit cards and never use them except as an ATM card.
- Specialist · Los Angeles, CA · Member since 2018 · 42 posts · 50 votes7y
Originally posted by @Steve Vaughan:
Originally posted by @Jay Hinrichs:
just curious how do you rent a car without a major credit card.. and a lot of other things require it like checking into a motel etc.
as a road warrior I cant fathom how I could operate without a card.. ?
We secure rental cars and motels when we travel with our debit cards without a hitch. When they ask for our credit card number, we put in or provide the debit card number. No problem!
One thing to be wary of is the hold that they put on your debit card, and the sheer risk of having your debit card information out there. I didn't see it mentioned, but card fraud happens... if your credit card is hacked, most card companies have some sort of fraud protection where you're not responsible for fraudulent charges, and they will remove the charges from your card while they research it. However... if this happens on a debit card, they hold your money while they research the fraud.
Basically... if something happens to a credit card, it's the bank's money at risk. If something happens to your debit card, it's YOUR money at risk...
If you can manage your spending and pay it off every month, using a credit card to get back some sort of return on something you would otherwise be buying (whether cash back, points, miles, etc), there is no reason not to realize that return and reduce your risk of getting your card information stolen.
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