As a country, there's little doubt that we aren't shy about swiping our credit cards.
The Federal Reserve estimates that three out of four Americans have at least one credit card—but it seems as though no two people use them in the exact same way.
At least, that’s what we discovered when we asked four average folks to share their strategies for how they use their credit cards.
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There were some unifying threads—the love of rewards points and the added benefit of budget-tracking abilities, for example—but everyone seemed to have a different motivation for why they used cards in the way that they did.
While their strategies may not necessarily be right for you, perhaps you’ll be able to glean some tips for your own spending—and saving—that can help transform your plastic from something you simply swipe at the register to a financial tool that can help you reach some of your money goals.
“Credit Cards Help Keep My Credit Score High—and Plump Up My Christmas Savings”
Who: Stephanie Brandt,
teacher and blogger at debtfreespending.com,
Her Plastic Strategy: Brandt uses her credit cards for a dual purpose: to reap cash-back and rewards benefits, as well as a way to help keep her credit score high, which has had a positive trickle-down effect in other areas of her life.
The card she uses for everyday spending nabs her enough cash-back rewards that she's able to save up several hundred dollars for holiday gifts. “I deposit my rewards cash into a savings account each month,” Brandt says. “I’ve saved anywhere from $200 to $500 each year toward Christmas using this method.”
Another card she uses frequently is cobranded with a hotel chain, which helps curb costs on family trips with her husband and two kids.
She pays a $75 annual fee, but it’s worth it for the 20,000 points she gets in return, which equals three nights of hotel stays. “I use this card throughout the year to acquire additional points, and then combine them to gain several [hotel] nights a year—in addition to the three I already get each year,” she says.
Thanks to her good credit standing, Brandt was able to qualify for a home-equity line of credit to help pay for adoption and IVF expenses.
Perhaps the best gift of all?
Since she uses her cards so frequently and pays them off in full each month, it has helped her maintain a strong credit score—which has paid off in more ways than one for her family. Namely, thanks to her good credit standing, she was able to qualify for a home-equity line of credit to help pay for adoption and IVF expenses.
Why It Works for Her: Growing up, Brandt watched her single mom struggle with finances and get turned down for loans, inspiring her to better manage her own money and credit responsibly. For Brandt, that meant living a fairly frugal lifestyle—and only spending what she could pay off right away.
But the rewards aspect gives her incentive to use the credit cards more frequently and get back a bit of “fun” money at the same time.
“We used our [hotel] points last year when we drove cross-country, and this year when we drove to Texas and back,” Brandt says. “We plan to visit all 50 states within our lifetime, and we’ve been to 30 of them so far!”
RELATED: How Many Credit Cards Is Too Many?
“Credit Cards Helped Me Get Out of Debt Faster”
Who: David Land, salesperson, Silver Spring, Md.
His Plastic Strategy: For Land, using multiple credit cards was actually something that helped him start tackling credit card debt that he'd accumulated during a period when he was having trouble finding a job.
As a way to pay less interest on that debt, which reached about $14,000 at its highest point, he would transfer balances to cards that offered no interest for an introductory period. “When the good terms of one card ran out, I would switch,” he says, adding that the strategy led him to open between eight and 10 credit cards over the years.
The balance transfers—along with a side job he got as a medical claims processor to boost his income—helped him pay off a big chunk of his debt in less than two years.
With his debt under control now, he mainly uses two cards on a regular basis for unique benefits. The card that he uses for day-to-day spending gives him a 3% discount on gas, as well as cash back at the end of the year in the form of a credit to his statement.
“I focus on cards that pay me, as opposed to cards where you accumulate mileage or other non-monetary incentives."
The other one is partnered with an online retailer that gives him 1% cash back, and also enables him to donate to charities when he buys through a special URL that credits a percentage of what he spends to his chosen causes.
“I focus on cards that pay me to use them, as opposed to cards where you accumulate mileage or other nonmonetary incentives,” he says.
Why It Works for Him: Ironically, Land once had problems getting new credit cards because he didn’t have much of a credit history. As a college student, he got bombarded with offers on campus, but on the advice of his father, didn’t open any.
“Then I got out of college and wanted a credit card, but no one would give me a card because I didn’t have any credit built up,” he says.
These days, of course, a lack of credit history is no longer an issue for Land. He tries to pay his cards off in full each month, but does carry a balance when the occasional flurry of unexpected expenses throws him off—like the few thousand he recently racked up due to car repairs and his cat’s veterinary bills.
Land admits that it's not ideal to rely on credit cards to cover rainy-day expenses. Transferring balances too often or opening too many new cards could negatively impact a credit score. But he does try to keep his emergency costs on 0% interest cards, which he then works on aggressively paying down, since there's a possibility he could be charged interest if he misses a payment.
Ultimately, for Land, his credit cards enable him to cover his expenses and get some additional benefits. “If I have to pay for a car repair, and it costs $1,500 and I get $15 … at least I’m getting something back,” he says. “You still want to use credit cards in a smart way to help yourself.”
“Credit Cards Help Fund My Dream Trips”
Who: Michael Sclar, business consultant, San Diego
His Plastic Strategy: Sclar’s credit card strategy helps fulfill two of his favorite things—traveling around the world, while saving money doing it.
Thanks to credit card travel rewards and promotions, he’s been able to save thousands on airfare. For example, since he knew that he wanted to go to the 2014 World Cup in Brazil, he opened an airline credit card back in 2010 that was incentivizing new customers with miles.
“I believe I received 30,000 or 40,000 bonus miles [when I opened the card],” he says.
The only drawback for him was the $95 annual fee, which was waived for the first year. “But I figured $285 in fees, plus any minimal booking or government fees, would be less than the $2,000 to $2,500 it would cost to get to Brazil and back,” he adds.
Sclar is using the strategy again to help pay for airfare to attend Mardi Gras. To get there, he opened another cobranded airline card for 50,000 bonus points, which already covers his round-trip ticket.
Indeed, with the help of the bonus miles and the miles he’d built up through his spending, it was worth the annual outlay. “It was a lifelong dream [to go to the World Cup], and I was able to fly for free,” he says.
Sclar is also using bonus miles to help pay for airfare to attend Mardi Gras in New Orleans, where he’ll celebrate his birthday. To get there, he opened another airline card for 50,000 bonus points, which already covers his round-trip ticket—a savings of about $600.
Plus, he also reaps a back-end benefit—using credit cards helps Sclar keep tabs on his spending.
He transfers amounts that match his credit card transactions throughout the month from his checking account to a special “credit card payment” savings account, where he holds the money until it's time to pay the cards.
“This allows me to maximize rewards points, build my credit score and credit limit amount, and even save a little extra because of the interest earned in the savings account,” he says.
Why It Works for Him: Aside from the fact that he gets to travel to dream locales, using credit cards gives Sclar a sense of control over his budget.
“My first real job out of college was working at a bank, where I learned the basics of cash flow,” he says, adding that although he interacted with a lot of different customers, it was the ones who struggled financially who stood out. This instilled in Sclar the desire to always stay on top of managing his money.
Although Sclar recognizes that his credit card strategy takes discipline, it’s a win-win for him: He nabs sweet airline miles, while getting to see how much he spends on everything from a meal to a round of golf.
“I get an immediate idea of my overall monthly budget," he says, "and it’s allowed me to live within my means.”
“My Credit Cards Help Me Shape My Budget”
Who: Glenda Oakley, personal development coach, San Antonio, Tex.
Her Plastic Strategy: Oakley opts to use her three credit cards over cash or debit to avoid the possibility of drawing down her bank account to zero. Plus, "at the end of the year, I am able to get an itemized statement of what I spent my money on.”
In fact, it’s this tracking capability tied to her main credit card that helps Oakley set her budget, enabling her to see how much went to everything from the drugstore to the salon. She even creates unique categories, like “kid's groceries,” to drill down more deeply.
What she gleans not only helps her determine where she should consider adjusting her spending, but it also comes in handy when she needs to itemize her expenses come tax time.
If one of her cards provides a special offer—say, three times the points for spending on groceries—she’ll use that card for those purchases to accumulate points.
Oakley's other ongoing strategy: making the most of her credit card points.
For example, if one of her cards provides a special offer—say, three times the points for spending on gas or groceries for the month—she’ll use that card specifically for those purchases to accumulate more points. She’ll then redeem them for gift cards to her favorite restaurants or use them for online purchases.
Why It Works for Her: Oakley’s strategy was born out of necessity. She had a son while she was still in college, which meant that she had to learn early on the importance of sticking to a budget.
“Nobody really taught me [how to budget]," she says. "I just became more money-conscious once I had my son.”
Today, almost all of Oakley's spending is sorted and itemized in her credit card tracking tool.
“When I first started putting things on a credit card without paying attention [to my expenses], some of the higher bills came as a shock,” she says. “If you’re not paying attention to what you’re spending, you may not be able to put as much money into things like retirement.”
LearnVest Planning Services is a registered investment adviser and subsidiary of LearnVest, Inc., that provides financial plans for its clients. Information shown is for illustrative purposes only and is not intended as investment, legal or tax planning advice. Please consult a financial adviser, attorney or tax specialist for advice specific to your financial situation. Unless specifically identified as such, the people interviewed in this piece are neither clients, employees nor affiliates of LearnVest Planning Services, and the views expressed are their own. LearnVest Planning Services and any third parties listed, linked to or otherwise appearing in this message are separate and unaffiliated and are not responsible for each other’s products, services or policies.