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Thursday, July 11, 2013

Commentary: On Savvy Use of Credit Cards to Pay for Your Living

Self-Help Empowering Series: Part 1

This article by Greg Haney deserves attention.  Below are my commentaries regarding his article: Article: How to Pay for Life (Expenses) With Your Credit Card Reward Points 

"I have three simple steps for using credit cards. 
Step one: Use credit cards for every purchase possible. 
Step two: Always pay off balances in full each month. 
Step three: Profit!"  

The plan here is to maximise your reward points, incur no cost or fee AND get more bang for your buck! Eg. some auto-memberships allow you to earn 0.08c per litre which you can redeem when you pay for your fuel, using a card that also credits your purchase towards your Frequent Flyer Account. When you've collected sufficient flyer points use these to fly for free or redeem for other items. 

One of the key points to note is that the cards themselves are free or has a cost that is more than offset by the benefits. And that you pay off the whole amount each month ie. you avoid paying the (usually hefty) interest charges. If you are using several cards you need to manage these well so that you don't incur the interest charges or affect your credit score adversely, accidentally by eg. forgetting the due dates for payment.

Use your card/s all the time, even for the tiniest purchases, and you will be surprised at how fast you can accumulate reward / fly points. Just in time for the deeply discounted airfares on offer at the moment ~ note the airlines' deep discounts since the markets jittered ~ for that exotic, sun-baked holiday where your dollar will stretch so much further, and allow you to indulge in fine accommodation, sumptuous food, fun sight-seeing and shopping expeditions ... all for a fraction of the price at home!

If you get the opportunity to pay for a large purchase with your credit card/s such as a deposit for a home or investment property (which usually you are not allowed to), rejoice!  You've just snagged a free, (probably international) airfare with your points, assuming you have at least one card that offers frequent flyer points.
Don't just buy something to get the points, get the points for buying something you already needed and would have purchased regardless of the points. And if that happened to be on sale, voila - you've just scored twice: made savings AND gained rewards!
Always ask if you can pay with your credit cards but make sure they don't charge you extra (can be anything up to 4% - airlines are notorious for charging much more than that, just for the privilege of using your card!). If a merchant insists on adding a 'surcharge' on top of the price, shop around and buy elsewhere.

If you apply this consistently re cashbacks and discounts (and not squander what you saved), over time you will get ahead faster financially than someone who did not have the discipline or the wisdom to do so. It's the cumulative effect, day in, day out (establishing a strong habit, and cultivating a wealthy mindset and attitude), and the (financial) compounding effect over a period of time that will lead to this snowball effect of seeing little, saved pennies turn into gold nuggets.

Note, it is the consistency of your actions that is important, because you won't see the impact if you only practised this ad hoc. The author had to plot a spreadsheet in order to keep track of what cards conferred which benefits, but you could start small, then progress to a full-blown spreadsheet as you get better and more confident at this. Even if you have to use a spreadsheet, remember there is no gain, without pain, in other words, be prepared to make some sacrifices ... initially. The rewards are worth it.

Note the apps that were recommended:

"mobile app Wallaby Card ... to store all my credit cards and uses my smartphone’s GPS location to determine which store I’m in and tell me which of my credit cards will yield the largest reward."

"web purchases - use LastPass, which stores a password-protected virtual copy of my credit cards, allowing me to pick the best reward payment with just a click, and without actually having the card on hand." you could be the next one to visit New Zealand soon for some adrenalin-filled, bungy jumping, white-water rafting or kayaking pursuits ... albeit in freezing waters!

Last but not least I leave you with a video of Warren Buffett's quotes to inspire you amidst the market turbulence of the last few weeks. Enjoy this video and if you're stock-market investing, stay safe and keep calm.

SMARTER Investing

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