I repeat: 19. Take advantage of credit card offers, sign-up rewards, and benefits.
This is actually the secret that turns my soda-pop into champagne. But it takes good impulse control, planning and vigilance. As you know, the credit card industry counts on you to overuse the convenience of deferred payment that they offer in hopes that you will carry debt that earns them exorbitant interest and makes them lots of money. If you fall prey to their ploy, you can pay way more than double what your purchases cost over time. I get a kick out of exploiting the banks' and airlines' eagerness to have my business. And they thank me for it.
We are flooded with offers to sign up for credit cards. Do it - carefully. Pick three that advertise the best introductory offers and benefits and read the promos carefully. I can't read that fine print so I call each company and ask them to verify and clarify each benefit, each fee and charge, and each penalty. "Do you really mean 0% interest for 20 months if I transfer a balance? Great! What will that service cost me? And what happens if I am late or miss a payment? What are the ways I can get in trouble? And what is your name?" Note the name and date on the paperwork next to the customer service number in case you need a touchstone for later calls. Knowing that they are out to get you if you misstep does not mean that you are paranoid.
Have two cards in use each month and a third or new offers for a third at the ready in case of a catastrophic emergency (see “g” and "i" below). Ready to play Spend Every Dollar Twice?
- Use credit cards that have frequent flyer programs with airlines that go where you want to go and give sign-up bonus miles. Can you afford a pay-up-front-on-any-airline Discover card and get reimbursed later? No? Well, if you've grown your savings account, you can pay the ticket from it and pay yourself back with the reimbursement. Make one card your main card at least till you get a free flight.
- Pay all out of pocket expenses (gas, Subway, doctors, groceries) by credit card. You will then have a record of those expenses for tax time on your bills and a yearly summary and you can see exactly why your living expenses were higher this month than last - oh, yes, it was that Veterinarian bill.
- Check your expenditures weekly on line to avoid surprise totals and pay your bill on line so it processes immediately. Switch to your secondary card when you get to the amount you feel comfortable shelling out in one lump.
- Know each card’s closing date. Set your own maximum expenditure limits for the month and stick to them. Maybe wait till after one card’s closing date to buy that big item.
- Record the closing dates and payment due dates of each card on the list of bills you made (Part I, # 2) for handy reference and to help plan for big ticket items.
- PAY EACH CARD IN FULL EVERY MONTH, borrowing a little from your savings account if need be to cover a heavy month and paying it back next month or next pay period.
- NEVER PAY INTEREST OR LATE FEES! But if you are late one month after you've created a record of paying on time, ask the card company to waive the late fee and interest charge. Most will do so once a year. Some will waive both, some only one. If they won’t – tell a supervisor that you regret leaving them, but you will have to switch cards. That may get you waivers.
- Set your payment due dates to fall at flush moments (I pay my mortgage and the card I use least two days after my social security check arrives on the fourth Wed of the month and the other after the pensions arrive on the first of the month.)
- If you have a catastrophic month, before using your equity line (Part I, #15 ) use the best interest free balance transfer offer you find on a new card. Look on line, call, ask those questions and apply for one. Make the transfer and put your monthly payback amount on your list of bills. If your payments must be too small to pay the bill by the end of the interest free period, pay what you can and in the last month of that promotion offer, transfer the balance to another interest free promo. Look for the ones with the longest interest free periods.
Why do all this? I love spending every dollar twice and thank the airlines for making it possible! My frequent flyer miles help me spend winters house-sitting in warmer climates where I often get paid as well as having a place to stay and usually the use of a vehicle. While gone, I rent my home for enough to cover its expenses. I am watching the last minute cruise deals as another travel option. My medical discount cards have so far kept me out of the donut hole and the free gym membership from my Medicare Advantage Plan gets me into some vital health routines. Paying with auto-draft insures no late payments and builds a good relationship with service providers who are then usually willing to help out in a number of ways if you hit a major financial crisis.
These are discouraging times financially for many of us, but we simply have to weather them as realistically as possible. I have come to enjoy the challenge of living lavishly within my means. This champagne lifestyle on a soda-pop budget requires maturity and vigilance. But it is worth the effort and gets easier as you get to know your minimum needs and spending patterns - even how you can splurge on the finer things in life now and then.
If you can make it work for you, I'm sure you will enjoy spending every dollar twice. And! you’ll earn the bonus of an excellent credit rating.
A Rich Financial Diet by Abby Freeborn is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License. For permission to use contact randmxcentric@gmail.com
I would also suggest that the consumer be aware of the lending institution used to collect those wonderful bonus points be a bank or credit card company who practices socially responsible and ethically sound lending practices. Even if you benefit from extra air miles as a result of your purchases, those perks could be at the expense of others.
ReplyDeleteIf you have paid off your house or nearly so, a home equity line of credit can be a godsend. Then, the month you put your homeowner's insurance and two airline tickets on your credit card, you can pay what your regular income won't cover out of the line of credit at a very low interest and pay it back as able. Don't abuse it, but use it as an alternative to taking it from your IRA, taking out a conventional loan, or worst option, carrying a balance on your credit card.
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