CC usage

[dantownehall]

So I generally live kind of one month behind on expenses (not in a bad way).

Basically, I use a rewards credit card for everything, and then pay the statement balance.  The way I see it, I'm getting to use the CC company's money for free (as long as I pay off the balance) for a month, which allows one more month of my pay to be working for me.

Anyone else do this?  Or does anyone want to face-punch me for doing this?  I still save a lot, I just save it before I pay my bills (if that makes sense).

[Cooperd0g]

I pretty much do the same, but I like to take a look at my finances each week and will generally pay off any balances. I'm actually going to be going to more bill pay even with the credit cards if I can.

[odput]

I do the same thing...it is a good way to "stick it to the man."  I don't think you'll find any facepunching for this, just don't lose track of paying the bill...with rewards running ~1-2% and interest rates running 10-20%, it only takes a month or two of not paying the balance in full to blow all the rewards you have earned

[acroy]

only way to do it!
we 'made' around $300 last year on rewards and gas savings from credit card use

[smalllife]

I generally pay off the card every two weeks, but I am a month ahead on income so I'm never spending money I don't have or relying on the next paycheck to pay off the credit card. 

[jfer_rose]

There was another thread around here not too long ago (I think the thread was about how much cash Mustachians use) that left me with the impression that many, many of us use our rewards credit cards as much as possible (just never carrying a balance). That's what I do.

[Integrate]

I think this is the best way to do it. The only expenses I don't have on my credit card are rent and student loans. I figure I might as well get the reward dollars. I have not, and never plan to, paid a penny of interest on my credit card.

[Jamesqf]

You can do better.  Lots of rewards cards have been offering 0% interest for a year or more.

[simonsez]

Same.  The last time I used cash for a type of transaction was for a buddy's poker night.  I don't remember the last time I used my debit card (other than getting out cash for said poker game).

[Frankies Girl]

Same here. As long as you're paying it off in full every time, it is a super deal. This is actually how everyone should be using credit cards (but boy, wouldn't the cc companies get peeved if that happened!)

I think we racked up over $500 in free money this past year by just using the rewards card to buy things and then paying it off each month.

[Integrate]

Same here. As long as you're paying it off in full every time, it is a super deal. This is actually how everyone should be using credit cards (but boy, wouldn't the cc companies get peeved if that happened!)

I think we racked up over $500 in free money this past year by just using the rewards card to buy things and then paying it off each month.

I suspect you are on the high end there. Remember that CC companies charge a transaction fee to the place where they are used. This is usually between 3-6% of the sale price.

Back in 2009 it averaged out to $427 per household that the CC companies collected from businesses. Given inflation, the CC company likely still made money on your purchases for 2013.

[Frankies Girl]

Same here. As long as you're paying it off in full every time, it is a super deal. This is actually how everyone should be using credit cards (but boy, wouldn't the cc companies get peeved if that happened!)

I think we racked up over $500 in free money this past year by just using the rewards card to buy things and then paying it off each month.

I suspect you are on the high end there. Remember that CC companies charge a transaction fee to the place where they are used. This is usually between 3-6% of the sale price.

Back in 2009 it averaged out to $427 per household that the CC companies collected from businesses. Given inflation, the CC company likely still made money on your purchases for 2013.

We use the rewards card for pretty much all purchases. I don't carry cash generally. And since most stores have built in the transaction fees to all purchase prices regardless of whether you use a credit card or cash, I'm just happy to get something. We do use cash if a discount is offered, but in general it's charge it and then pay it off.

I agree about the transaction fees, but they make quite a tidy profit off of those poor souls that charge things and then pay the minimums each month, at 10 or even 20+ percent interest, so I still think the industry as a whole would be horrified if everyone started using cards responsibly. ;)

[MrsPete]

I'd say it's a good idea as long as

- You're not buying things you wouldn't have purchased otherwise (but this would not include scheduling purchases to max out benefits; for example, if Discover is giving extra reward points on gas in the month of June, it's smart to top off your tank on June 30th instead of waiting 'til you actually need gas the first week of July).  I've read that people tend to spend more when they're using plastic because it doesn't feel like "real money", but I don't think I do that myself. 
- You're not paying a yearly fee for the privilege of owning the card. 
- You're paying off the bill so that you're not paying interest, and you're paying online (or in some other way so that you're not using a stamp to pay the bill). 


I do it myself.  In fact, now that I'm paying college tuition on the card, I'm really racking up reward points. 

[CWAL]

I go one step further - I don't worry about the percentage rewards too much, I'm a signup bonus junkie.

I figure out my typical monthly spending, and every three months or so find a couple cards with good signup bonuses requiring minimum spending in the next three months equal to said spending.

Rinse and repeat.  Been doing it for a while now and no noticeable drop in my credit score (not that my credit score really makes any difference to me at this point in my life - do not intend to take out any sort of loan in the foreseeable future).

Drop a smallish charge or two on older cards here or there to keep them open and keep credit utilization low, keep track of any cards which have an annual fee and cancel them before the second year.  It's kind of a weird atypical hobby for me. :)

[LalsConstant]

You just have to build up the habit.  I used to abuse credit cards and reformed.  I am a little silly about it now as I actually make weekly payments to keep the balance at 0 for as many days as possible.

It really doesn't make a huge difference to me as far as cash back etc. goes but it's free money so it helps.

But if they took it away tomorrow the only thing I would be would be inconvenienced.

[dantownehall]

You just have to build up the habit.  I used to abuse credit cards and reformed.  I am a little silly about it now as I actually make weekly payments to keep the balance at 0 for as many days as possible.

It really doesn't make a huge difference to me as far as cash back etc. goes but it's free money so it helps.

But if they took it away tomorrow the only thing I would be would be inconvenienced.

I guess my point was (in the original post) that it's actually a good thing to keep the balance on the card until the last second that it's possible to not pay any interest (basically using their money for your expenses, and investing your own).

Sounds like quite a few of you agree and do the same!

[kpd905]

As long as you are disciplined and organized, rewards cards can be a great way to either increase your income or decrease your expenses, depending on how you look at it.

So far this year my girlfriend and I have signed up for 13 cards between us.  We have used the miles/points for about $4000 in flights, hotels and statement credits so far.  I still have about $1300 in points I could cash out with Chase, but might transfer them for a flight instead.

Most cashback cards get you 1-5% back.  I am always completing a minimum spend for a sign up bonus, so I have gotten up to 75% cash back on my spending, probably averaging 20%.

[TGod]

We do this as well. We have an avion visa, it costs about $175/year for 2 cards, but it has been worth it in the past. My hubby and I took a trip to Hawaii last year, 900$ tickets each, after having the card for 2 years and putting everything on it. We're back up to being able to do the same right now, with some points leftover.
We put everything we can on it, but our spending has gone down since we've stopped renovating so it's no longer the great deal for us, and we intend to cancel it once we've used up our points this year and move to a free card with regular cashback.

[FreeBy45]

We also take advantage of “manufactured spending” opportunities each month to rack up more credit card points. For example, I send $1k to my husband each month through Amazon Payments using my credit card as the funding source (no fees) and then he withdraws the money right back into our bank account. That is an easy 12k points per year. You can do the same thing with the Serve AMEX prepaid card. We each have one and fund it with $1k each month with our credit cards. That's another easy 24k points each year between both Serve cards. Just make sure your credit card company doesn’t view it as a cash advance. I use the Chase Sapphire and they view it as a purchase, so there are no cash advance fees.

[Jamesqf]

So far this year my girlfriend and I have signed up for 13 cards between us. 

How the heck do you manage to keep them straight?  I have a bit of trouble with just the current four.

[Gerard]

I know a lot of people on the frequent-flyer lists churn through cards like crazy for the sign-up bonuses (this year I've done 50K miles and 5 hotel nights in sign-ups, all on first-year-free cards). General consensus on those sites is that you take at most a 5 or 10 point hit on your credit score, and that you need to keep the cards open for about six months to stay in the CC companies' good books.
wrt keeping track, those serious guys have spreadsheets for this! So they can re-apply for a card 24 months and one day (or whatever) after their last application.
Google "points guy" for a blogger who's seriously serious about this.

[Jamesqf]

That rate seems too much like work, at less per hour than I can make coding.  Plus I suspect that since I'm only interested in cash, not FF miles and such, my opportunities are more limited.

[Stache In Training]

Yes, I do the same thing.  I put all my bills (the one's that would let me) auto-pay onto my CC.  Then I just make sure my CC is auto-pay in full.  This way I know I'll never get a late fee or anything.  Also, I have cards that I know get a better % back on groceries, and use them at grocery stores, and then other cards that get better on everyday purchases, and etc.  It'd be hell without auto-pay, as I would be swimming in bills and writing checks.  I just always check the statement to make sure there's no fraudulent charges, and then just make sure there's enough cash in my checking account when the withdraw is about to happen.

One thing I'd be careful with though, is to make sure you're not charging small amounts (like under $5) at little mom and pop shops.  They are having a hard enough time staying afloat, they don't need the extra 3-6% charge.  Just a good way to be neighborly!

[kpd905]

So far this year my girlfriend and I have signed up for 13 cards between us. 

How the heck do you manage to keep them straight?  I have a bit of trouble with just the current four.

Spreadsheets.  It isn't too bad though, because once I hit the minimum spend and get the bonus, I am basically done with that card, so I just put it away until I hit the 10 or 11 month mark to cancel it.

That rate seems too much like work, at less per hour than I can make coding.  Plus I suspect that since I'm only interested in cash, not FF miles and such, my opportunities are more limited.

If you are interested in cash, but you ever pay for a flight or hotel with cash, then you wasted it by not getting it for free with a card.  I'm not sure what the hourly rate would end up being either, but I'll attempt to change your mind.  I'll try my best example:

• Sign up for Chase MileagePlus Explorer (5 minutes)
  
  Receive card, call to activate (5 minutes)
  
  Login to Amazon Payments and send my girlfriend $1000 to hit the minimum spend (5 minutes)
  
  Book two flights to Miami with the 50,000 miles (5 minutes)

That is 20 minutes of time for $700-750 worth of flights, so about $2000/hour.  That was my best return so far at 75%, $750 for $1000 spend.  There are cards that give $400 for $1000 spend, or $400 for $3000 spend.  All or most of the spending can be done in a couple minutes if you send someone $1000 per month with Amazon Payments and then have them cut you a check or transfer it back to you some other way.

[Rural]

I put just about everything on a 1% rewards card (cash), but I don't go to any great lengths.

I'd go for another cash back card with a signup bonus as long as there was no annual fee. Haven't spent the time to look, though. Maybe I should.

I'm not interested in a travel rewards card, either. The only traveling I do, work pays for.

[wtjbatman]

I put just about everything on a 1% rewards card (cash), but I don't go to any great lengths.

I'd go for another cash back card with a signup bonus as long as there was no annual fee. Haven't spent the time to look, though. Maybe I should.

I'm not interested in a travel rewards card, either. The only traveling I do, work pays for.

I think there's supposed to be a Capital One Quicksilver card that people who are into the rewards thing are talking about as the best card (at the moment). You can google it easily enough for the details, or check bankrate.com

[Rural]

I put just about everything on a 1% rewards card (cash), but I don't go to any great lengths.

I'd go for another cash back card with a signup bonus as long as there was no annual fee. Haven't spent the time to look, though. Maybe I should.

I'm not interested in a travel rewards card, either. The only traveling I do, work pays for.

I think there's supposed to be a Capital One Quicksilver card that people who are into the rewards thing are talking about as the best card (at the moment). You can google it easily enough for the details, or check bankrate.com

Thanks. I'll look into that. I use bankrate.com for all sort of other things, but for some reason didn't think to check it for, well, bank rates.

[simonsez]

I like simplicity. We got our first and only CC in April (in our mid-30s). We are using the AmEx Blue Cash Preferred which has an annual fee. However, it gave us 6% back on our first $6K of groceries and 3% back on all gas. 1% back on everything else. Honestly, we don't spend a lot on things out of the food/gas categories, so it would not be sensible to be using a lot of cards for us. Our mortgage and electric cannot be paid w/a CC. Neither can piano lessons.

I'm in a similar boat except my gas/groceries CC has no annual fee but is only 5% back on groceries instead of 6%, but is 5% back on all gas.  Only up to 3k/year of each though.

[irrational]

I like simplicity. We got our first and only CC in April (in our mid-30s). We are using the AmEx Blue Cash Preferred which has an annual fee. However, it gave us 6% back on our first $6K of groceries and 3% back on all gas. 1% back on everything else. Honestly, we don't spend a lot on things out of the food/gas categories, so it would not be sensible to be using a lot of cards for us. Our mortgage and electric cannot be paid w/a CC. Neither can piano lessons.

We started using the Blue Cash Preferred this month. We've been really enjoying the rewards, and find that with our family we will be able to max out the 6% grocery rewards making the $75 a year fee worth it.

Additionally the extended warranty and no-hassle return policy offered by Amex means that we'll be using it for any major purchases as they crop up.

We've essentially been using it as a debit card. I have a saving account labeled "amex", and as we make purchases I immediately transfer the money to that savings account. This ensures I'm never relying on CC float, and never left with a surprise when it's time to pay.

[smedleyb]

I go one step further - I don't worry about the percentage rewards too much, I'm a signup bonus junkie.

It's kind of a weird atypical hobby for me. :)

40 plus cards and 4 million points in 28 months -- yeah, I can relate!

[ichangedmyname]

I go one step further - I don't worry about the percentage rewards too much, I'm a signup bonus junkie.

It's kind of a weird atypical hobby for me. :)

40 plus cards and 4 million points in 28 months -- yeah, I can relate!

So you sign up, use it for the minimum required time/amount to get the reward then cancel? Doesn't it hurt your credit score?

[HokieInPa]

We use 3 cards:
Amex Blue Preferred for groceries and gift cards bought at grocery store to get 6%
Chase Freedom Visa for rotating categories at 5%, mostly for gas
Capital One Venture for everything else, pays 2% on all purchases

[AccidentalMiser]

I use my Costco Amex for everything unless they don't take Amex.  3% back on gas.  2% on restaurants.  I travel a lot for business.  I pay off the balance every Saturday morning.

[missundecided]

I go one step further - I don't worry about the percentage rewards too much, I'm a signup bonus junkie.

It's kind of a weird atypical hobby for me. :)

40 plus cards and 4 million points in 28 months -- yeah, I can relate!

So you sign up, use it for the minimum required time/amount to get the reward then cancel? Doesn't it hurt your credit score?

I believe, after doing the necessary spend, you can just stop using it but DON'T cancel until maybe 6 months. I'm not 100% on the time period you should keep it open to minimize the damage to your score. I'm sure someone will correct me if I'm wrong.

[daverobev]

I guess for every 'points gamer' there are a few hundred 'use normally', and maybe tens of 'carry a balance' - still very much in the banks' favour.

I dabble. I'm more into the cash back stuff than points (though I really could use a holiday), and I do have a 0% card which is REALLY nice. But, as I am relatively new to Canada, my 'age of accounts' is low so I'm sticking with what I've got, at least for a little while!

[daverobev]

Ho-lee-crap, that Points Guy site is... overwhelming.

I guess you have to either travel for business or.. I don't know, spend/waste a lot of money to get to a point where a $450 fee card makes sense.

2% on gas & groceries is good enough for me, I think!

[YK-Phil]

I never or rarely use cash, and use my Aeroplan card for every purchase, be it for coffee, to pay municipal taxes, or a plane ticket. I also get to use it occasionally for work (charged $4,000 of hotel rooms last week for a board meeting). I've been paying the balance in full every month since I've had a credit card, and never paid a cent of interest. This card usually gives me about 60,000 Aeroplan miles per year, enough for a roundtrip to Europe. However, one must be very diligent about paying the whole balance in order to benefit from reward cards, but if you have a tendency not to pay your bills on time, using cash is the best option to avoid the so-common credit card trap.

[canadian]

I'd say it's a good idea as long as

- You're not buying things you wouldn't have purchased otherwise (but this would not include scheduling purchases to max out benefits; for example, if Discover is giving extra reward points on gas in the month of June, it's smart to top off your tank on June 30th instead of waiting 'til you actually need gas the first week of July).  I've read that people tend to spend more when they're using plastic because it doesn't feel like "real money", but I don't think I do that myself. 
- You're not paying a yearly fee for the privilege of owning the card. 
- You're paying off the bill so that you're not paying interest, and you're paying online (or in some other way so that you're not using a stamp to pay the bill). 


I do it myself.  In fact, now that I'm paying college tuition on the card, I'm really racking up reward points.

Wow, I can't believe your college allows you to pay with CC. Most Canadian universities don't allow CC payments, to save on fees.

I'd amend your rules slightly. I pay a $39 fee for one of my cards. The card comes in three versions. The $39 version doubled my rewards from 0.5%-1% to 1%-2%. I seem to have earned an extra $150 from the change. Fees aren't a problem per se, if the extra rewards pay for the fees.

I also follow OP's strategy. Pay for almost everything with CC to get the rewards, then promptly pay off statements. I didn't realize the secondary benefit until he pointed it out: we're free to earn interest on the money we're saving up to pay off our statement.

[kpd905]

So you sign up, use it for the minimum required time/amount to get the reward then cancel? Doesn't it hurt your credit score?

I'll jump in since I have signed up for 13 cards this year.  For any card with a fee, I plan to keep them for 10-11 months, then call and ask to have the fee waived.  Sometimes they'll offer you enough points to offset the fee.  If they don't, then I'll cancel or downgrade to a no fee card.

Regarding the credit score:  I signed up for an Amex card in March that gave me my official FICO score at 760.  Since then, I signed up for 13 cards, one auto loan and another hard pull from an apartment search.  My official FICO score 2 weeks ago was 787.  760 is generally thought of as the score that will get you the best rates on a mortgage or other loan.

Between my GF and I signing up for cards this year, we took two flights to Miami, two flights to Portland, two to Wisconsin.  I think we had 4 or 5 free nights in hotels and a couple hundred dollars in statement credits.

I am currently planning a trip to Maui that will use up most of our remaining points.  But free flights to Maui and free 4-5 star hotels for 8 nights will be worth it.

People interested in retiring early seem to be organized and well disciplined, both qualities that can make you successful at the credit card churning hobby.

[dude]

+1 for the Amex Blue Cash Preferred. Use it for all qualified expenses.

Also have a Travelocity Amex, which gets me Travelocity rewards points that I can use toward travel booked on Travelocity.  I take 3-5 trips/vacations per year, and 95% of the time, I'm booking the flight/hotel combo through Travelocity, so it works well for me.

[NinetyFour]

This might be a stupid question, but are we expected to pay income tax on cash rewards from credit cards or from banks (I got a $50 bonus when I opened a checking account at Cap One)?  (I am in the US.)

[YK-Phil]

This might be a stupid question, but are we expected to pay income tax on cash rewards from credit cards or from banks (I got a $50 bonus when I opened a checking account at Cap One)?  (I am in the US.)

I don't know about the USA, but here in Canada...well, let's keep this quiet and raise any red flags, I know a couple of CCRA agents who are also mustachians and they might be lurking around here...

[aclarridge]

I use the Capital One First Class Travel card. Effectively 2% cash back, effectively costs $20/year, $350 (in points) signup bonus. It's the best all-around card I could find after a lot of looking. The method for redeeming points is to "erase" travel purchases. They just credit your card balance, so there's no tax implications for sure. It has worked really well for me so far, incredibly easy to use and customer service has been good.

Oh yeah and in regards to OP, for sure, I think most frugal people use their credit cards this way. Don't feel too smug though; as has been mentioned before, credit card companies (Mastercard, Visa) still make money on people like you and I who never pay any interest. We are just doing our best to minimize the damage, and I don't think we end up paying much to the credit card issuer (i.e. Capital One in my case).

[gillstone]

That is how I paid for Christmas.  We pay all the bills we can on an American Express Blue Cash Preferred  that is 0% interest for 10 more months.  We get 6% back for groceries, 3% for gas and 1% for everything else and we got $150 sign up bonus.  We've had the card for 5 months and now we are paying for Christmas with reward dollars. 

[YK-Phil]

As long as you are disciplined and organized, rewards cards can be a great way to either increase your income or decrease your expenses, depending on how you look at it.

So far this year my girlfriend and I have signed up for 13 cards between us.  We have used the miles/points for about $4000 in flights, hotels and statement credits so far.  I still have about $1300 in points I could cash out with Chase, but might transfer them for a flight instead.

Most cashback cards get you 1-5% back.  I am always completing a minimum spend for a sign up bonus, so I have gotten up to 75% cash back on my spending, probably averaging 20%.

You got me hooked! I have been using my Aeroplan Visa exclusively for a couple of decades now to rack up hundreds of thousands of travel miles, but I just realized I missed out on all these sign-up bonuses. Even with the $120 annual fee for a premium travel reward card, it is well worth the cost if I can get get the typical 15,000 points welcome bonus, which is enough to pay for one short haul roundtrip between where I work (Yellowknife) and where I live (Calgary) worth between $500 and $1,000 depending on the time of the year. Cancel before the end of the year, rinse, and repeat...

[kpd905]

This might be a stupid question, but are we expected to pay income tax on cash rewards from credit cards or from banks (I got a $50 bonus when I opened a checking account at Cap One)?  (I am in the US.)

For checking account bonuses, they will typically issue a 1099 for that as taxable income.  Credit card rewards are not taxed.

You got me hooked! I have been using my Aeroplan Visa exclusively for a couple of decades now to rack up hundreds of thousands of travel miles, but I just realized I missed out on all these sign-up bonuses. Even with the $120 annual fee for a premium travel reward card, it is well worth the cost if I can get get the typical 15,000 points welcome bonus, which is enough to pay for one short haul roundtrip between where I work (Yellowknife) and where I live (Calgary) worth between $500 and $1,000 depending on the time of the year. Cancel before the end of the year, rinse, and repeat...

It is definitely addicting.  I have to say I don't know what the Canadian offers are like, but if you go read the Flyertalk forums, you'll find all kinds of info.

[madage]

This might be a stupid question, but are we expected to pay income tax on cash rewards from credit cards or from banks (I got a $50 bonus when I opened a checking account at Cap One)?  (I am in the US.)

Credit card rewards are considered rebates, not income. I don't have a link, but I think the IRS put out guidance on this at one point. Typically new bank account bonuses will be reported as interest income via a 1099, so it's a good idea to include them on your tax return...

[NinetyFour]

Thanks for the answers wrt taxes.

[daverobev]

Ho-lee-crap, that Points Guy site is... overwhelming.

I guess you have to either travel for business or.. I don't know, spend/waste a lot of money to get to a point where a $450 fee card makes sense.

2% on gas & groceries is good enough for me, I think!

But why 2% when you could get 3% gas/6% groceries with AmEx Preferred?  IIRC the fee was $75/yr, and we recouped that very quickly.

I don't live in the US. Plus the supermarket I go to doesn't accept Amex.

There is a 4% Scotiabank card, with a $99 fee. But honestly we only spend a couple of hundred on groceries, and roughly the same on petrol, so it's not worth it - for us. Say $400 eligible a month = $16 back; currently $8 back; x 12 months = a difference of $96. And usually we spend less than that on petrol & shopping so...

[nawhite]

I use the Capital One First Class Travel card. Effectively 2% cash back, effectively costs $20/year, $350 (in points) signup bonus. It's the best all-around card I could find after a lot of looking. The method for redeeming points is to "erase" travel purchases. They just credit your card balance, so there's no tax implications for sure. It has worked really well for me so far, incredibly easy to use and customer service has been good.

This sounds very similar to the Barclaycard Arrival World Mastercard I use. Basically $400 signup bonus, effectively 2.222% cash back on everything, $89/year waived first year. Same deal with "erasing travel purchases." Technically its 2% cash back but if you use it to erase travel, they'll give you 10% of your points back.

Haven't worked with customer service yet but their website is great so no complaints so far.

I was trying to do the double southwest cards to get 100k points and then get the Companion Pass (your SO flies free with you whenever you fly), but they dropped the signup bonus down to 25k points from 50k per card so it isn't easy to do anymore.