Don't Abuse Your Credit to Get "Free Money"

An interesting article on ArtWoo where the author makes some valid arguments that credit cards should be used only in times of emergency and living within our means is the prudent thing to do:

Credit cards make sense to use if you know and understand how to use them correctly. Americans abuse credit cards, mistaking them for "free money" and opening many different cards at the same time to satisfy their thirst for expensive things and, ironically, things they can't afford.

If you use your credit wisely, you can actually save money by purchasing on credit. This requires paying off your credit every month to avoid interest and fees. In this sense, the 30 day loan is "free money" since your money is increasing with interest while sitting in your savings account.

Also, if the credit card that you use is a "cash back" card, you're also discounting the purchase price from 1 to 5%.

Saving money to get "free money" is ultimately the plan you need to work at:

1. Pay everything in cash for two months.
2. Keep track of everything you purchase.
3. Use Quicken or MS Money to help you track and budget your expenses.
4. Accumulate enough savings for your monthly budget then start rotating monthly expenses on your card to get the cash back and interest free loans.

Remember the important thing is to save and budget. Use your credit cards wisely by paying off the balance each month.

5% October Cash Back Bonus Down the Drain

I really screwed up big last month using my Discover Card. I forgot to sign up for the 5% cash back bonus which is something you need to do every 3 months by either login into the Discover account center or by calling Discover.

The last quarter of the year, the 5% cashback bonus includes purchases at grocery stores, restaurants, movie theaters and movie rentals.

A major portion of our expenses are eating so it's not unusual to spend $1000 on food for the month. With 5% cash back, we would have saved about $50 in October, but since I forgot to sign up the first of October, we only saved $10 under the normal 1%.

The rest of the year we should be able to save more especially when planning meals for Thanksgiving, Christmas and New Years.

If you haven't signed up already, give Discovery a call or apply your savings online in the account center. It's never too late to sign up for the extra cash back -- just make sure that you remind yourself to do it as early as possible in January, April, July and October to take advantage of the savings accumulated over three months.