The 5 Basic Financial Categories – Part 3
Because like most, we had a number of credit cards, you have to see the need of having a single place to see your credit card activities. Besides, if you’re relying on your memory to recall all the times you spent what, then you’re in bad shape anyway. We needed Mint to help us track our credit card activity. There’s no need to have to go to each card website or wait on a statement to see an overview. You can use one place to see it all. Today we discuss the second of the five basic financial categories.
Credit Cards. We no longer recommend the use of credit cards for anyone who has credit card debit. In other words, if you have at least one credit card that holds a balance that you can’t and will not pay off within the next 30 days, we don’t believe a credit card is the right answer for you. It’s just practicing how to be in never-ending debt. However, if you are one of the fortunate ones and have your credit cards under control, we do recommend the use credit cards. Let me offer you three purposes for which you can use a credit card to your advantage as we do.
Purpose 1: Ease of paying. A credit card offers a way to make paying for things very easy. When you have a credit card, you don’t have to waste the time it takes to send checks, wait for the check to cash and then reconcile your bank statement. It makes securing travel and accommodations very easy. Try to book a flight or hotel or rent a car without a credit card and see how painful this process becomes. You might stop traveling if you didn’t have this method available. Having a credit card makes paying for things easy.
Purpose 2: Insurance against theft, fraud and accidents. While this isn’t always obvious and doesn’t apply to some credit cards, a credit card can offer you additional insurance. It has the ability to insure you against theft. If someone steals the card, you can report it and the charges won’t count against you. Many credit card companies will also inform you when you credit card is used in abnormal ways to help you detect fraudulent charges. Lastly, a credit card will provide you auto insurance when you rent a vehicle for your travel needs.
Purpose 3: Your money can make money. It took us a while to get here, but we did it. You can use credit cards as a way to provide you an opportunity to earn money for your spending (i.e. cashback purchasing or flight miles). The point is, if you’re going to use a credit card, let it work for you not against you. We pay for everything using a credit card that provides 2% cash back on every purchase. We let the points (dollars) accumulate until Christmas. This is how we pay for Tamia’s big Christmas gifts. It’s her reward and ours for being disciplined in using our credit card.
The key to anything in life, especially credit cards, is to know the purpose. I’ve heard it said that abuse can only occur when something is used outside of its purpose. Here are a few practical examples of how we use our credit cards.
- Barclaycard. This is our card for any business (company-related) travel we do. We figured that we didn’t want these transactions mixed in with our family’s.
- Capital One. This card had to be our favorite. They offered 1.5% cash back on all purchases. We no longer use this card for all purchases, but rather for our personal travel only. It’s our way to segment our travel spending from any other spending and the cash back points don’t hurt either.
- Fidelity Rewards Visa. This is now the card we use for all our purchases and all the spending that we do. This card gives us 2% cash back on every purchase made using it. We also use this card to pay our monthly expenses. It’s the one card we use daily and have with us wherever we go with the exception of travel.
Again, I wish to reiterate the main takeaway. Have a plan for everything. In this case create a plan for how your family uses its credit cards and for what purpose. Get your family on board with the plan and see how the plan can work towards your overall goals.
Today is Friday!
What would having a plan for your credit cards make happen in your family, your life, your business?