Why Use a Credit Card?

Again, thanks to everyone who is looking to improve their financial situation. As of THIS MORNING, I had 358 views! Keep following and keep saving!

As I mentioned in my last post (which you most assuredly read and more assuredly heeded my words), I spent $2,429 last month. A certain portion of that (my fixed expenses) I was not able to pay with credit card. Usually rent, mortgage, car payments etc are only able to be paid via Debit or Credit Card if you pay a fee. However, if the reward outweighs the fee, DO IT!

Here's an example: 

If you have $1,000/month in rent to pay, but they charge a $2.95 processing fee, then that fee is only .295% of the amount you're spending. If you even earn 1% on all purchases with your credit card, you're up by .705%. That means you made $7.05 by using your credit card vs. writing a check. That's $84.05 in rewards a year. Go out to eat a nice dinner with that (and PAY WITH YOUR CREDIT CARD).

The more likely scenario is that if you have a $1,000/month in rent to pay, they charge a 5% processing fee. Now if you make 1% on all your purchases, you spent $50 in processing fees, but only made $10... So you lost out on $40.

DON'T HAVE A CREDIT CARD?

GET ONE!!!
YOUR CREDIT DEPENDS ON IT!

When applicable and when it makes sense, I use a credit card for every purchase I make, BECAUSE:

1.) I can more easily track my expenditures

2.) I receive credit card points

3.) By using the credit I am allotted, it shows I am responsible and EXPERIAN, TRANSUNION and EQUIFAX just love someone showing responsible use of credit.

Why is tracking your expenditures important?

So you know where your money is going. If there is anything you are trying to do, in this case saving, you need to point out your weaknesses. I have two great sites to track my expenses:

                                 

                                 CHASE

MINT

From the Chase info-graph, I can see that I spent $684.50 at restaurants last month because I earn 2 points per $/spent. This is my largest expenditure.

From the Mint graph, I can see that my largest expenditures are Home, Auto and Food. Home and most of auto is a fixed expense, so I can't reduce that by much. Food and Dining is a variable expense however. If I want to save money, I should focus on this area.

You'll notice that because the credit card statement does not show my fixed expenses (because I cannot use a credit card for them) this automatically eliminates items that I cannot reduce the payment on.

Are Credit Card Reward Points Worth it?

As you'll see above, I have 94,527 points saved, as of last month, on one card. With that, I can do the following:

1.) Receive a check/deposit for $945.27.

2.) 4 Adult/4 Child 1 Day Passes to Universal Studios

3.) $945.27 towards Amazon.com purchases

4.)  $1,6000 credit towards a flight and have 4,527 points left ($45.27)

SO YES, THEY ARE WORTH IT!

Responsible Credit Use?

Experian, Transunion and Equifax (the three Racketeers if you will) are the three big credit bureaus. They are responsible for almost all of credit reporting done in the United States (so you want to keep them on your good side). What's the easiest way to do this? HELP THEM MAKE MONEY!

The two ways that these companies make the largest portion of their money is 1.) Charging companies such as Chase, Honda Financial, Ford Financial to report data to them. 2.) They sell your information in the form of leads to other companies.

As an example, let's say you have 3 credit cards - 1 from Chase, 1 from Fifth Third and 1 from Huntington. You use Chase and Fifth Third ALL THE TIME. One's a Mastercard and the other you use is a Visa, so it just depends on what that merchant accepts. But you never use Huntington. After a certain period of time, Huntington stops reporting your data to the bureaus. Well, they don't like making less money so this hurts your credit score because as they put it, you are not utilizing all available credit. This is bad because they say it's bad. But ALSO, if you use too much credit (getting over 35% of the available amount on any one line, this is also bad)... HMMM...

The moral of the story is, use all your credit cards at least once every few months, but don't use too much of your credit on any 1 card, but also use your credit card anytime you can...

Get it? Got it? Good!

To receive a FREE and CONFIDENTIAL personal financial assessment, email me at davids@eqfin.com.

Next week: Monthly Mortgage Insight