Over on The Simple Dollar, there is a post about using a portfolio of credit cards for specific purchases, a way to try to maximize rewards and benefits on cards.
The "ideal" portfolio described seems like a lot of work to me - not in remembering to pay the bills, but simply in remembering which card to use when.
I currently use two main cards - an Amazon Visa from Chase and a Discover card. I use the Amazon Visa for most of my purchases - I get 3% back on Amazon.com purchases and 1% on other purchases. Everytime my rewards hit $25, I get an Amazon.com gift certificate in the mail. Given the myriad of things you can buy on Amazon.com, this has been a great rewards program for me.
I only use the Discover card for their 5% cash back bonus offers - every quarter, Discover sets up a few categories where all your purchases in that category gets you 5% cash back. Last quarter, it included things like travel and hotels. This quarter includes clothing and department stores. Take note people - next quarter includes gas purchases. To keep track of which things I should buy with the Discover card, I put a Post-It note on the card with the categories very clearly listed. Discover allows you to take your rewards as cash back or in the form of gift cards, and you often get a little bonus if you take the gift card - $20 will get you a $25 gift card from certain stores, for example.
I also have a few store credit cards, mainly because of the coupons provided. These are stores I shop at regularly, so the rewards and coupons are worth it. They don't get much use though.
Again, I never carry a balance on any of my cards, which makes the rewards worth it. And also makes me a drain on the credit card companies, if you think about it! I'm happy with my current use of credit cards. I'm careful to keep track of what I've charged on each of them, and I can't say that I've spent more just because I'm using multiple cards. Over all, it's a good system that works for me. Of course, as with everything, your mileage may vary.
Showing posts with label credit cards. Show all posts
Showing posts with label credit cards. Show all posts
Thursday, May 1, 2008
Thursday, March 6, 2008
Cash or Credit?
I have discovered that I'm one of those people for whom cash just burns a hole in my pocket. I limit myself to taking a specific amount of cash out of the ATM each month. I can spend it on whatever I want, but when it's gone, it's gone. For the most part, it tends to go to the occasional caffeine fix during the afternoon, splitting dinner and drinks with friends, things like that. (Of course, during farmer's market season, I take out more cash, deduct that amount from the grocery budget, and buy all sorts of fresh, delicious food.)
I am one of those people who does much better with budgeting if I use a credit card. Number one, I use only one credit card, even though I have multiple. It is an Amazon.com Visa by Chase. I love the rewards, and since I pay it off every month, the higher interest rate does not bother me. (I am working to better utilize my Discover Card though, and take advantage of their 5% cash back opportunities.) I am much less likely to pull out my credit card for a quick $2.00 purchase, where as plunking down that amount of cash is a quick process.
I've also found there's something to having to transfer that big chunk of money to the credit card company every month - yes, I could automate it, but having to type it in and watch it transfer makes it sink in a bit more.
Part of the problem might be that I don't track my cash expenditures. Maybe if I tracked it, I would be less likely to spend at random, but each time I tried that, I ended up without receipts, and forgot what I had purchased. It was a failed experiment. The new experiment is to always budget the same amount of cash every month. So if next month, I start the month with $20 in my wallet, well, I can take out $20 less from the ATM, and rebudget that saved $20 into another budget category, like an additional $20 to my clothing or book fund. For the most part, looking at it that way has helped.
It seems that among personal finance bloggers, there is a debate over whether it is better to go to an all cash system or to completely avoid cash and use credit or debit cards. After reading all the opinions, I don't think there is a right answer. I think it depends on a number of factors, and everyone should do what works best for them. Which is why I'm sticking to mainly credit card transactions.
I am one of those people who does much better with budgeting if I use a credit card. Number one, I use only one credit card, even though I have multiple. It is an Amazon.com Visa by Chase. I love the rewards, and since I pay it off every month, the higher interest rate does not bother me. (I am working to better utilize my Discover Card though, and take advantage of their 5% cash back opportunities.) I am much less likely to pull out my credit card for a quick $2.00 purchase, where as plunking down that amount of cash is a quick process.
I've also found there's something to having to transfer that big chunk of money to the credit card company every month - yes, I could automate it, but having to type it in and watch it transfer makes it sink in a bit more.
Part of the problem might be that I don't track my cash expenditures. Maybe if I tracked it, I would be less likely to spend at random, but each time I tried that, I ended up without receipts, and forgot what I had purchased. It was a failed experiment. The new experiment is to always budget the same amount of cash every month. So if next month, I start the month with $20 in my wallet, well, I can take out $20 less from the ATM, and rebudget that saved $20 into another budget category, like an additional $20 to my clothing or book fund. For the most part, looking at it that way has helped.
It seems that among personal finance bloggers, there is a debate over whether it is better to go to an all cash system or to completely avoid cash and use credit or debit cards. After reading all the opinions, I don't think there is a right answer. I think it depends on a number of factors, and everyone should do what works best for them. Which is why I'm sticking to mainly credit card transactions.
Monday, January 7, 2008
Credit Cards - Yay or Nay?
A lot of people have the attitude that credit cards are bad. I have used credit cards since I started college, and I have the opposite opinion. Provided you are with the right company, and provided that you use the credit card responsibly, credit cards are a great thing.
I currently have credit cards from two major companies, as well as a few store cards here and there. I really only use one card; the other gets used in emergencies or if a great rewards promotion is going on. I have never carried a credit card balance. Therefore, I have never paid any interest on my credit cards. And that probably informs my opinion about my credit card.
My main card is a rewards card. I try to put all of my expenses on that card. I have found that if I carry cash, I will spend it without a thought. If I have to pull out my credit card, however, and see that expense tracked in Microsoft Money, I am much less likely to make the purchase. I know some people are exactly the opposite. This is what works for me. The other benefit to putting everything on that one card is that I can clearly see what I am spending in a month's time. I can see when my spending is getting a bit higher than I would like. Plus it helps the rewards add up.
I freely admit that I signed up for my store cards for the initial discount and the coupons. Was it worth it? Probably. Again, I pay these cards off every cycle. And in at least one instance, by opening the card, I got a significant discount on a purchase. I also get some pretty good coupons in the mail. This month is my birthday month, and I got a number of coupons from stores at which I have a credit card. Will I use them all? No. Will I check out the stores to see if the discount is worth it? Probably.
For me, it is very important to track my expenses each month. I have been using Microsoft Money for years to track my income and expenses. I have it set to download my credit card statements, and review the charges at least once a week, usually two or three times a week. I know what recurring charges are applied to my credit card every month, and I know when they will be applied. Without looking, I can tell you the date my credit card statement will be issued and the date on which the payment will be due.
One thing I love about my credit card is that it allows my money to work for me. Essentially, the credit card company is giving me an interest free loan for the month, letting me buy whatever I want on their dollar. My money gets to stay in my bank account and earn interest. Of course, if I don't pay the credit card company back for this loan on time, they will start charging me interest.
I know a lot of people who find cards with 0% APR for a number of months and then charge everything to those cards, putting the money to pay off the cards in a high yield savings account, and then paying off the entire balance before the interest rate increases. While they can make a significant amount of interest doing this, the thought just makes me panic a little inside. I have tried convincing myself that I don't need to pay my credit card the day that the statement is issued. I can wait a week. I can wait until the day before the balance is due if I want. But doing so makes me worry that something will happen and the payment won't be applied and I will end up with all sorts of fees. I have found a middle ground. I typically make the payment 7-10 days before it is due. That way, I've gained some interest due to that grace period, but there is no chance the payment won't be applied in time.
A few years ago, I got a phone call from the credit card company indicating that they believed my number had been stolen and fraudulent charges were being made. They were absolutely correct. But the company had caught this fraud so quickly that none of the charges ever applied to my account. Yes, the account was frozen, and then closed. But the credit card company sent me a new card (and offered to overnight it to me if I needed it), and I have had no problems since. I consider that great customer service. I can't imagine the hoops I would have had to jump through if something similar had happened with a debit card.
So all in all, I am definitely pro credit cards. But I do see the other side of the coin. They're not for everyone, and they do have their pros and cons.
Where do you stand on the issue?
I currently have credit cards from two major companies, as well as a few store cards here and there. I really only use one card; the other gets used in emergencies or if a great rewards promotion is going on. I have never carried a credit card balance. Therefore, I have never paid any interest on my credit cards. And that probably informs my opinion about my credit card.
My main card is a rewards card. I try to put all of my expenses on that card. I have found that if I carry cash, I will spend it without a thought. If I have to pull out my credit card, however, and see that expense tracked in Microsoft Money, I am much less likely to make the purchase. I know some people are exactly the opposite. This is what works for me. The other benefit to putting everything on that one card is that I can clearly see what I am spending in a month's time. I can see when my spending is getting a bit higher than I would like. Plus it helps the rewards add up.
I freely admit that I signed up for my store cards for the initial discount and the coupons. Was it worth it? Probably. Again, I pay these cards off every cycle. And in at least one instance, by opening the card, I got a significant discount on a purchase. I also get some pretty good coupons in the mail. This month is my birthday month, and I got a number of coupons from stores at which I have a credit card. Will I use them all? No. Will I check out the stores to see if the discount is worth it? Probably.
For me, it is very important to track my expenses each month. I have been using Microsoft Money for years to track my income and expenses. I have it set to download my credit card statements, and review the charges at least once a week, usually two or three times a week. I know what recurring charges are applied to my credit card every month, and I know when they will be applied. Without looking, I can tell you the date my credit card statement will be issued and the date on which the payment will be due.
One thing I love about my credit card is that it allows my money to work for me. Essentially, the credit card company is giving me an interest free loan for the month, letting me buy whatever I want on their dollar. My money gets to stay in my bank account and earn interest. Of course, if I don't pay the credit card company back for this loan on time, they will start charging me interest.
I know a lot of people who find cards with 0% APR for a number of months and then charge everything to those cards, putting the money to pay off the cards in a high yield savings account, and then paying off the entire balance before the interest rate increases. While they can make a significant amount of interest doing this, the thought just makes me panic a little inside. I have tried convincing myself that I don't need to pay my credit card the day that the statement is issued. I can wait a week. I can wait until the day before the balance is due if I want. But doing so makes me worry that something will happen and the payment won't be applied and I will end up with all sorts of fees. I have found a middle ground. I typically make the payment 7-10 days before it is due. That way, I've gained some interest due to that grace period, but there is no chance the payment won't be applied in time.
A few years ago, I got a phone call from the credit card company indicating that they believed my number had been stolen and fraudulent charges were being made. They were absolutely correct. But the company had caught this fraud so quickly that none of the charges ever applied to my account. Yes, the account was frozen, and then closed. But the credit card company sent me a new card (and offered to overnight it to me if I needed it), and I have had no problems since. I consider that great customer service. I can't imagine the hoops I would have had to jump through if something similar had happened with a debit card.
So all in all, I am definitely pro credit cards. But I do see the other side of the coin. They're not for everyone, and they do have their pros and cons.
Where do you stand on the issue?
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