My wife and I run up thousands of dollars a month on our credit cards. We like it that way, and we’re not going to stop.
We buy almost everything we can on on two credit cards – from big purchases (we charged $5,000 when we bought my wife’s car) to small (80 cents for a pack of gum this week). As a result, there’s one category of goods we rarely buy: gifts.
Many people buy Christmas presents with their credit cards. But for my wife and I, our credit cards buy Christmas presents for us. Like a lot of folks, we have cards that are linked to reward programs. But we do things a little differently, and it adds up to a lot of savings…
A deficit of debit cards
Credit card usage is plummeting in America, as more of us reach in our wallets for debit cards. One study last month by a research firm called Javelin proclaimed, “Credit card use among consumers decreased by 31 percentage points between 2007 and 2009.” Before the recession, 87 percent of us regularly used credit cards. Last year, it was down to 56 percent.
Sure, debit cards prevent you from spending money you don’t have. But they don’t offer the free rewards many credit cards do – although that’s starting to change. I’m a longtime Bank of America customer, and I’m getting a lot of unsolicited junk mail and email begging me to sign up for the bank’s rewards card.
But our two cards have the best rewards we can find – more on that in a moment – so the wife and I use our regular ol’ bank debit card for just one use: ATMs. The rest is on all the credit cards.
Who needs cash?
This month, I’ve been tracking how much cash I’ve spent. Answer: none. And I even went to Las Vegas on a business trip. Sometimes it was a hassle – in Las Vegas, if you want to charge for a cab ride, you have to say so in advance and wait a little longer for a cab with the latest technology. But while I carry $50 for emergencies, it’s just been collecting dust in my wallet.
When I park in my local downtown to go shopping or out to dinner with my wife, I park at meters that accept credit cards. I park in garages that accept credit cards. I’ve bought a newspaper at a convenience store on a credit card. A few years ago, I’d get a funny look from the cashier, as I signed a receipt for 50 cents. These days, many transactions don’t even require a signature.
So what do I get for ignoring my debit cards and my cash? Wonderful rewards. Here’s how the wife and I do it…
- The embarrassment factor: To reduce the chances we’ll overspend, we use only two distinct credit cards – one for each of us. Since we both have access to the other’s monthly statement, if one of our cards racks up more frivolous charges than the other, it’s easy to spot, and the resulting embarrassment keeps our spending in check.
- Good budgeting: By keeping our own card, we can more easily track our purchases. We know it’s crucial to keep a budget, yet like most Americans, we’d rather get a root canal. But with nearly all our purchases on two bills each month – both available online and searchable – it’s simple to figure out how much we spend on everything from groceries to gasoline.
- High rewards: We chose cards that may not offer the best interest rates and grace periods, but since we pay off our balances each month, who cares? (We hate carrying a balance so much, I once sold my car and traded down just so I could avoid that.)
Both cards offer a wide array of rewards that make for excellent holiday gifts, especially for what I call “in between people” – coworkers and bosses and friends of friends you really like but don’t know well enough to guess what they’d want as a present. The rewards program for my Amazon card isn’t as extensive as my wife’s Sapphire card, but it offers a lot of gift cards. And for a guy buying presents for another guy, nothing beats a $25 Amazon gift certificate, a $50 Starbucks card, a $50 Dunkin’ Donuts card, or $150 off airfare to anywhere.
My wife’s Sapphire card offers even more. Besides more gift cards (Gap, Saks), she can acquire Mikasa dinnerware for around 6,000 points, Tommy Hilfiger sheets for 4,600 points, and even an iPod Shuffle (the latest model) for 6,700 points. Like nearly all other rewards cards, ours offer one point for every dollar spent, although Amazon pays me triple points for shopping at their site, which I do often. That’s why I keep the card instead of getting a Sapphire one like the wife.
More for the same
As credit card use declines, I’ve noticed our own card’s rewards have gotten even better.
Originally, all I could get for my Amazon points were Amazon gift certificates and a couple of restaurant gift cards – still good enough for my guy friends. But nowadays, the options have expanded. And my wife’s card? If she saves enough points, she can get free furniture. Although I wonder: Has anyone sprung for a “Hillsdale Tiburon II Bedroom Set, Queen Bed w/ 4 Drawers, Dresser, Wood & Metal Mirror & Nightstand” for a whopping 324,800 points?
Other reasons we love credit cards
I’m not saying this approach works for everyone. Obviously, if you’re in serious debt, you need to pay that down first before even thinking about credit cards, much less rewards. But I imagine there are a fair number of folks out there like me and the wife: Not rich by any means, but also not in major debt and capable of managing plastic.
We have frugal cars that are paid off, and we don’t know how to wisely invest our meager savings. But by taking advantage of what credit card companies are offering, we save hundreds of dollars a year and many hours of time and aggravation worrying about what gifts to get friends, coworkers, and family – and how to pay for it all.
And even if we couldn’t rack up great rewards, the wife and I would keep using credit cards as much as we do – because there are so many excellent yet understated benefits, from 8 Reasons You Should Love Credit Cards to 7 Things a Credit Card Can Do That a Debit Card Can’t.
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