Credit card is a useful tool to save money if used strategically.
There are two types of credit card options, cash back vs. travel cards.
Cash back cards earn you a percentage of cash based on the money you spend, generally between 1% to 6%, while travel cards give you points and you can convert them to cash when you purchase airline or train tickets.
I only use 1 credit card, and it is a travel card. My rules for using a credit card are the following:
– only spend what I could pay off at the end of each month
I have a monthly budget and I stick to my goals and only spend accordingly.
– automate my monthly payment to avoid late fees
I automate my credit card payment to avoid late fees. However, I still remember the payment date in order to track my monthly spending, which ultimately is the plan to focus on living.
– use my credit card as much I can for fixed costs (utilities, MetroCard, subscriptions)
I optimize my credit card to earn travel points. Using my credit card towards household spendings helps me optimize my reward even if I don’t spend money elsewhere.
– only use my points for traveling because I get the most return when I convert my points to purchase tickets
I consolidate my credit card usage towards one travel card because my goal is to travel and do it cheaply. Therefore, I only redeem my points towards airline tickets, which gives me the best return on my investment.
Here’s the snapshot of my current credit card spending:
*The total amount is approximately 25%~28% of my income.