If, on the other hand, you have a handle on spending, credit
cards can be very useful. First off, they allow you to easily pay for things
without having to immediately deduct money from your bank account. If you pay
off the credit card bill each month in a timely manner, it basically amounts to
an interest-free short-term loan. But if you plan to build up a balance on a
card and then pay only a portion of it each month along with interest payments,
then forget about using credit cards. The interest on credit cards can be
pretty steep. You don’t want to get stuck making these hefty payments if at all
possible.
Here’s what we personally look for in credit cards. REWARDS!!
A card must not have an annual fee, unless
the rewards paid by the card more than compensate us during the year.
Currently, all the cards we own have no annual fees. Also, the card must allow
us to pay it off in full each month with no interest or penalties. In other words,
the cost to us for the card’s use must be zero, but additionally it must pay us
back. In essence, the credit card company should be paying us for using their
card. Another feature to look for is the ability to have the credit card company
automatically withdraw the total amount due from your bank account each month.
This prevents you from accidentally being late making a payment, resulting in
interest and late fees. Just make sure you have enough money in your bank
account to cover the withdrawal when the bill comes due. We set up monthly
reminders on our electronic calendar for this purpose.
Some cards pay back a percentage of each purchase regardless
of where the purchase is made. Other cards give rewards based on the type of
purchase. Common ones are for gas stations, grocery stores, and drug stores. If
you travel a lot, some cards give rewards that can be used for airline flights.
Also, some businesses team up with Visa or MasterCard to provide a card with
rewards, particularly if you use the card at the business. Some businesses have
their own credit cards that can only be used at their stores.
If you look around, you can find some pretty good deals on
cards. Here are a few we use that you might want to look at. Please be aware
that the description of the rewards we receive with these cards can change at
any time. In fact, we have occasionally quit using cards when they change their
rewards programs to be less desirable or when better cards come along to
supplant them.
This is a good general use card because it pays a flat 2%
cash back on all purchases. In order
to get this card you will have to set up a Fidelity Investments account. The
rewards can be deposited into either a taxable account, an IRA, a college
savings plan, or sent to the cardholder as a check. However, the full 2% is
only available in check form if we let the rewards build up to at least $250.
We use this card for all purchases except for those where we get a bigger
reward using another card. The one disadvantage of this card is that quite a
few businesses, especially small local ones, do not accept American Express
cards due to their higher merchant fees.
This card is issued from the Pentagon Federal Credit Union. This
account is primarily designed for government, particularly military, personnel.
However, we were able to make a donation to an organization that supports
military families, and that allowed us to join. You must also set up a savings
account with the credit union and make at least a $5 deposit. However, the
rewards are well worth it. You get 5% back on pay-at-the-pump gas purchases, 3%
on supermarket purchases, and 1% elsewhere. We only use this card at gas
stations, supermarkets, and any place that does not accept American Express. Gas
companies, such as Shell and BP, sometimes offer credit cards that have 5%
rewards on purchases made at their stations, but we much prefer having one card
that gives us 5% back for gas purchased anywhere.
Normally the rewards paid by the Discover card are not as
large as those from some other cards. However, every few months, special 5%
bonuses are offered on certain purchases. For instance, it will soon be
offering 5% cashback bonuses at restaurants and movies. One caveat is these
specials always have spending caps. We only use Discover when the special
offers are better than what we can get with any other card. Points earned with
the Discover card have to be redeemed with gift cards. Some cards can be
purchased for less than their face value. One of our favorite ways to cash in
our Discover points is to get a $50 Chili’s Grill & Bar gift card in
exchange for $45 in points.
Some businesses offer credit cards that give you substantial
rewards for use at their store. For instance, the Best Buy RewardZone
MasterCard offers a 4% reward for purchases made at Best Buy and 1% elsewhere.
Amazon’s Visa card offers 3% rewards for Amazon purchases, 2% for certain types
of other businesses, and 1% elsewhere. Many times the rewards come as vouchers
that can be used at their store rather than as cash. However, if you make
regular purchases at these stores, that’s as good as cash.
Store Cards
Some stores, such as Kohl’s, JCPenney, Sears, and others,
offer credit cards that can only be used in their respective stores. Under
normal circumstances, these cards generally don’t offer any incentives for
their use. However, occasionally the stores will offer sales that can only be
taken advantage of when using their card. It can be very useful under those
circumstances, especially given that they usually give the discount at the time
of purchase. Still, we do not bother with a card from a store we shop at
infrequently. Oftentimes a store will offer a steep discount on the entire current
purchase for opening a credit card account with them. We sometimes do this if
we are making a large purchase and the discount is substantial, but normally we
take a pass on these offers.
Student Cards
Some credit card companies offer cards that are geared
toward college students. They will typically offer rewards on purchases that
are of interest to this age group. Our son uses the Citi
Forward Card. It should go without saying, but we’ll say it anyway. If your
college-age child is not very responsible with their spending, DON’T give them
a credit card. BAD IDEA!
There are many, many different types of credit cards on the
market to meet the needs of essentially every type of spender. We have
mentioned only a few that we have found to be useful. For others, check out the Credit Card
Guide.
Keep in mind that the deals can change frequently. The
rewards we mentioned earlier may not be available by the time you read this. Also,
there may be cards available that we would like better, but just haven’t
happened onto them yet. Indeed, if anyone reading this finds a great credit
card, be sure to let us know about it.
If you use credit cards at a lot of different businesses, you
may find that to maximize your rewards, you may need to have a plethora of
different cards. This can become unwieldy. Sometimes you just have to say, “No
more cards.” Decide how many cards you are willing to keep up with, determine
which ones will benefit you the most, and go with just those. If you
occasionally order merchandise from Internet sites that you are not totally
confident in, you will want to have one credit card with a low spending limit
so nefarious individuals who might decide to use the card will be limited on
what they can spend.
Speaking of credit card theft, be sure to find out if you
are responsible for some amount of money should a card be lost or stolen and
then used by someone else. If seems to us that most companies’ cards these days
do not require a fee from you under these circumstances. Another thing to be
aware of is that some cards cap their rewards. This is okay. Just remember to
switch to a different card once you reach that cap because you will no longer
receive any rewards on purchases that exceed the cap. And again, watch out for
those annual fees and penalties.
Happy credit card shopping. May your balances be paid in
full each and every month.
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