Credit Cards: Friends or Foe
Everyone owns a credit card. The average American owes almost $10,000.00 in credit card debt. This can amount to thousands of dollars in interest paid to credit card companies. Interest that is not even deductible on your taxes. In this example, a credit card is positively a Foe.
One might ask how this debt happens. Credit card companies pride themselves in getting consumers hooked on the plastic card at a very young age. Colleges across America allow credit card companies to set up promotional tables, send enormous mailings, and advertise anywhere college students are present. They offer large credit lines and entice students to charge now and pay later. Credit card companies teach the young that it is normal to spend more than you can afford, and pay off the debt over a long period of time. It is the “American” way.
I’ve prided myself on using several credit cards, but my credit cards are my friends, not my Foe. Using them in a positive manner can help you become more organized, save you money, and receive free products.
To consider a credit card your friend, you have to abide by the most important rule: PAY IT OFF IN FULL EVERY MONTH!!! This is the only way you will actually benefit by having credit cards.
I own four major credit cards. Three are Visa and one is Master Card. The four cards have four different purposes. My first card is for my business. Everything my partner or myself purchases for the business, we use the credit card if we can. This allows for one monthly on line payment, and the statement helps with the accounting. We pay no yearly charge, and we earn dividend points that accumulate for purchases we may need in the future.
I have a Credit card that is used strictly for a popular convenience store that also sells gas. This card gives my wife and I a four percent credit on every purchase that can be used in the store, including gas. My wife travels approximately one hundred miles per day to get to and from her job, so the gas bill accumulates fast. Over the course of a year, we save approximately $300.00 by using this card. This is $300.00 tax-free dollars, which amounts to almost $400.00 if we were earning the money as a salary.
A third credit card we use is for medical expenses. The main reason for this is because our medical insurance requires us to pay for Doctors visits and prescriptions up front, and then we are reimbursed 80% by the insurance company. There is a cap where the coverage then becomes 100%. The reason for this card is to help us keep our medical expenses separate and to insure we submit all of our medical expenses. This card also gives points to purchase items in the future. On an average year, we earn about $100.00 worth of merchandise.
The last card, and most used card are for all other expenses. Everything we can put on this card, we do. We pay our insurance, utilities, groceries, dining, entertainment, and every other expense we incur. Again, this card has no yearly expenses, and at the end of the year we get an itemized list of how our monies were spent. The points we receive on this card are used towards vacations. We either trade them in for airline tickets, hotel stays, or rental cars. Depending on which works best for us, we usually receive about $800.00 worth of merchandise per year.
If I combine all four credit cards, I earn about $1300.00 tax-free dollars per year and the cards help me minimize my accounting. This $1300.00 amounts to approximately $1800.00 in taxable salary.
I personally get excited about using my credit card. They can be your friend or foe. The decision is yours as to what relationship you may want to have with the plastic industry!