This third one, we wanted to kind of go into. This is credit card rewards. You know, as I like to say, they’re perkalicious because, is that a place? Rock, rock, you nobody. Because it is one where credit cards are dangerous. Don’t, don’t, don’t mishear me. We hate credit card debt, absolutely despise it. If you have any credit card, I mean absolutely, it’s a binary decision. It’s either zero or greater than zero. You don’t get to use credit cards. But if you’re a person that can pay your credit cards off every month, there really are some benefits. And this is the type of moment where maybe this is an easy way to get some free money. That’s exactly right. So, let’s talk about the benefits, and we’ll talk about the free money.”
The first is with a credit card, as opposed to a debit card, you get better fraud protection. If something happens, you know, we live in this age where cybercriminals are getting better and better and better at stealing our information. It’s not a matter of when your credit card will be compromised; it’s a matter of when it will be compromised. So, if you are using a credit card as opposed to a debit card, you do have some additional protections in place. Instead of the thief getting your hard-earned money, they’re getting the credit card’s hard-earned money. It’s different than if you actually see money leave your checking account, leave your savings account at your bank. Yeah, I think federally, but you know that you’re only liable up to fifty dollars for a fraudulent transaction. But I’ll be honest, I’ve had quite a few. Unfortunately, when you shop online, you’re going to… It’s like you said, it’s not if; it’s when you’ll have some type of fraud or something. I’ve never had a credit card company even make me pay the fifty dollars. It’s amazing how much they protect you on that. So, while you’re shopping online and other things, take advantage of that protection.
Another thing that credit cards can do for us: they can help you actually build your credit. They can improve your credit. Obviously, your payment history and the types of credit and your credit utilization all go into your credit report and your credit score. Well, the better your credit is, the better it’ll impact other areas of your finances. Like, you might have lower insurance rates; you’ll obviously have lower borrowing costs. So, if you can have a really healthy credit score and a healthy credit life, then it’s not impossible to think that, man, I’m actually going to save dollars in other aspects of my finances.
Yeah, and I like to… You can’t say percolicious without actually giving a little extra on that. When I’m talking about extra things, I’m talking about extending your warranty. Safe: what if you could add an extra year to all of your gadgets and gizmos that you buy? I like purchase protection. It’s kind of one of those things you don’t have to worry, am I getting ripped off? Because, you know, there’s some protection there. And then think about traveling. My wife and I were watching YouTube, like I said, we’re not watching live TV anymore, we’re going on YouTube and doing searches on things. We were figuring out how you buy your travel tickets significantly cheaper with a point system and playing it, not necessarily opening up additional credit cards and playing that game, but just making sure you’re maximizing every point. That’s powerful: the lounges, the credit… I mean, the car insurance protections. There are lots of benefits that you ought to really think about that are nice perks to kind of implement.
But maybe you say, ‘Hey, guys, I’m… That doesn’t sell at me. I don’t do all the travel. I don’t want to keep up with the points. I don’t understand how that works.’ Well, a lot of credit cards actually offer straight-up cash back rewards. If you swipe, if you use the credit card, you actually receive cash back. So, it’s not incredibly difficult to think if I’m using my credit card on the things that I’m already going to spend money on anyways, and I get cash back, I’m actually buying those things for less than I would have been buying them otherwise. So, I thought it was pretty cool because we were like, ‘Let’s try to figure out how much actual savings, at two percent, if you were doing a cash back credit card, what would it create?’ But I know there’s already going to be people out there who are very anti-credit card use, who will say, ‘Guys, credit cards cause you to spend more. Behavioral issues.’ Yeah, behaviorally, you potentially go spend more money. I was like, ‘What’s for the math part of this? Let’s keep it to stuff exactly what you said you would go spend money on anyway.’ And what’s a good way to see what that is? Well, we know the average debit card is used for about thirteen thousand five hundred and fifty dollars worth of transactions, debit cards. I think that’s probably, since it’s your money, that would be a good baseline to use. Everybody who even advocates against credit card use still doesn’t have an issue with debit cards. So, we have thirteen thousand five fifty, and then I said, ‘Well, what… There’s other things. There’s utilities; there’s your property and casualty insurance on your automobile and other things like that.’ And we figured out that utilities and car insurance average about six thousand eight hundred and seventy-six dollars. If you added those two things together, things you were already going to spend money on, had a two percent cash back credit card, that could generate about 409 dollars a year of additional money coming into your household. That’s… I want you to think about that. It’s four hundred dollars you did not spend any more money than you were planning on spending anyways. You didn’t go buy additional things or try to run up debt. You just, instead of swiping the one that has a ‘D’ on it, you swipe the one that has a ‘C’ on it. You did not change any other behaviors, and just by doing that, four hundred dollars came back to you from using credit cards. For more information on how to use credit cards wisely, check out this article called, “How to Use Credit Cards Like a Pro.”