Making Credit Cards Work for You | RSA Deasil Advisors

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“Make your money work for you.” We have heard this phrase applied to so many areas of our life. I argue we should make how we spend work for us as well. In this article, I will address how credit cards are an underutilized area where individuals can earn extra money.

I am not a big fan of using debt to get what you want, but I am a fan of utilizing tools to make your life easier and put extra money in your pocket. Credit cards fall into a grey area where they are a form of debt but can be a powerful tool for the consumer if used correctly.

Credit cards over the years have gotten a lot of people into trouble, especially in their younger years. Credit card companies understand if they can issue ten credit cards, seven of the cards issued will carry a balance. Credit card companies will then make money on the interest they charge on the outstanding balance.

Experian says 75% of Americans with credit cards have a balance of more than $0, and the average balance held was $5,315 in Q3 2020. With interest rates of 16% or more, you can see why credit cards get a bad rap of being a terrible product to have.

In this article, I want to talk about the good side of using credit cards. Before we do that, let us first lay some ground rules. I recommend only using credit cards if you

Payoff your credit card balance in full every month
Have over three months of living expenses saved
Have a credit card limit of 2 months’ worth of living expenses

If you can say yes to the three items above, you now have a green light to use credit cards responsibly.

There are three benefits I want to cover when using credit cards as a payment function

Simplifying your Financial Life
Cash Back and Other Rewards
Consumer Protection

Simplifying your financial life

Bills…Bills…Bills. There is always something due, and payments have to be made on different days of the month. My clients have used credit cards to simplify their life by setting up their bills on automatic payment through their credit cards. Unfortunately, you cannot set up automatic payments with your mortgage, car note, and utility bills, but your other bills can be easily put on a credit card with autopay.

If you use this strategy, your new largest payment will now be your credit card. This will make it easier to plan your bank accounts strategy on a month-to-month basis. I have found simplifying your finances in areas like these will give you more time. With the extra time, you can now focus on earning more money through investments or enhancing your human capital.

Cash Back and Other Rewards

My favorite reason to utilize credit cards is to take advantage of the cash back savings. Some cards are offering 2% or more cash back on certain purchases. This is the ultimate way to make money while spending.

There are also other rewards that you can consider, like travel, discounts on certain products, and gift cards. If you are strategic enough, you can get a bang for every buck you spend.

To shop around for the card that fits your lifestyle, check out this website (Nerd Wallet)

Consumer Protection

There is no better feeling than to make a purchase and the product does not deliver what you expect and then calling your credit card company to cancel the payment. You will feel empowered and protected once you see your money refunded to your credit card. In my opinion, credit cards offer the best consumer protection when it comes to making a payment.

In a world of buying things online and identity theft, knowing you have these protections are in place can make spending money more enjoyable.

Summary

Before you try to utilize these strategies, make sure you

Paying off your credit card balance in full every month
Saved over three months of living expenses
Have a credit card limit totaling two months’ living expenses.

Credit cards can be a dangerous tool, but they can be a powerful part of a wealth-building strategy if used correctly. Being able to take advantage of the benefits of credit cards is the perks of being financially wise with your money.

Randall Avery, CFA

Financial Advisor │ Author │ Public Speaker

R.S.A. Deasil Advisors, LLC

Office: 531-333-2745

Email: Deasil@rsadeasil.com

Website: www.rsadeasil.com

P.S. If you would like me to speak at your next event, please click HERE

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While working with clients, Randall realized there was a missing process that individuals were not performing when choosing to use their money. Motivated to fill this gap, Randall developed three models to ‘Hack The System’ and allow individuals to Create Your Own System (CYOS). Randall hopes effectively using these models will help individuals identify the best moral and ethical use of their money.

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