How We Utilize Our Credit Cards

As I have mentioned before, my wife and I are huge advocates of using credit cards to your advantage. As long as you are diligent enough to pay off your credit cards each month, you can earn money from cash back rewards. If you fail to pay them off each month, you will owe the credit card company high amounts of interest and the benefit of cash back rewards is wiped out.

My wife and I have a very intentional plan when it comes to spending our money. We try to minimize our daily expenses without having to spend a lot of extra time cutting coupons. This stems from our commitment to a frugal lifestyle. Yet, we are also busy with our hobbies and school activities that we can’t afford the extra time to perform too much savings. Just like anyone else, life is a balance between what you want to do, what you can afford to do, and what you have time to do. You can’t do everything, so you have to pick and choose your battles.

Using credit in a smart way not only helps us save money and time, but it also is the means by which we track our expenses. Talk about a Win-Win!

How and Why We Plan our Spending Around the Discover Card

My wife and I plan out which credit card we are going to use when paying for everyday expenses like gas, restaurants, vacations, based on the rotating cash back rewards on the Discover It Card. Some may think I am crazy, but it makes the most sense. Every 3 months, Discover offers 5% cash back on different categories. In the summer, it is usually gas and other categories include restaurants, hotels, airfare, etc.

So, every couple of months we review the featured categories and determine which card is the best to use for what. We only have to do this a 3-4 times a year and it only takes a few minutes. Most of our other credit cards have a standard 1-3% cash back. We think of Discover as the “trump card” – whenever we got to buy something within the featured category for that designated time, we make sure to use the Discover It Card.

The reason why we plan which credit card we are going to use based on Discover is because 5% cash back is the highest reward on any credit card that I own (and have heard of). Here’s how I think of it: If I am going to use a credit card to pay for something, should I use a card that will give me 5% of the purchase back or should I use one that will give me 1%-2%? It seems simple, doesn’t it?

You Can Take Advantage of the Discover Card Rewards Too

Over the course of the year, my wife and I earn somewhere between $400-$500 in cash back rewards with our various credit cards. We make sure not to buy more stuff just to get the rewards (that would be pointless) and only use it on everyday items that we need. While you could limit yourself to a cash-only budget, using credit cards responsibly helps you beat the system and get a few extra bucks.

Apply for the Discover It Card

The application to apply for the Discover card is quite simple. When I was in college, Discover was one of the first credit cards that I got. I started out with a VISA from my local bank and then moved on to get a Discover card because of the better rewards. If you don’t have a Discover and you have been looking for a way to save more money, this is a great way to save money. Why would you want to pass up on the opportunity to get 5% back on rotating categories?

photocredit: Andres Rueda via Flickr

9 Responses to How We Utilize Our Credit Cards

  1. Jai Catalano says:

    I don’t think it sounds crazy… If you have the time and patience to do it then it’s not crazy. You just spending on anything anytime is crazy… What you do is specific and helpful.

  2. I think using multiple credit cards like this is a great idea, especially when one has rotating ‘bonus’ categories. Rather than being lazy and just using a card with a flat rate cash back on all purchases, you are maximizing the credit card rebates. The Discover More Card is really an awesome choice for anyone looking to get cash back.

  3. You see… it sounds good. Plannning and using c/cs according to your plans. But then there are those who like me, do not plan, and get carried away using a c/c, especially if it gives me a great excuse of “earning reward points.” Enjoyed the article though. :)

  4. [...] How We Utilize Our Credit Cards by 20′s Finances – a slightly different strategy than I use, but the fundamental principle is the same…we maximize our cash rewards and pay by credit card whenever possible.  [...]

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  6. Louis says:

    It is wise to use credit card as a leverage thus stretching your cashflow. What more if they give cash back as big as 5%, who wouldn’t grab that

  7. [...] has you thinking about using credit cards for the cash back bonuses, you may want to think twice. Using credit cards effectively can be beneficial because you are earning money on the stuff you would normally spend anyway, but [...]

  8. [...] you had trouble paying your bills? If you are anything like me, the last thing that you want to think about when you return from a [...]

  9. Yes! Completely agree with this thought process. I was actually lucky enough to have parents that taught me this concept from an early age. So I’ve always seen credit cards as a convenience tool (not having to carry cash) that I could make money from.

    Heck, while renovating my house, one of my credit cards that I rarely use offered me a 0% for like $10k for a year! All I had to do was make a monthly payment, and then on month 11 I paid off the balance. So that was a 0% loan from a credit card company!

    Now, I will admit that if you try to share these concepts with most people it will blow their mind – basically, for many people trying to follow a budget it’s not a good idea.
    I think that they should listen to DaveR and cut up their credit cards, put cash in envelopes, etc.

    Thanks for sharing!

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