Intro to Credit Card Hacking

Credit cards are the devil!!!

At least that’s how many people think. However, if you are smart with it, you can reap tons of benefits. What kind of benefits you may ask? What about free or discounted flights, cash, hotel stays, access to lounges that the public can’t access and tons of security. And that’s just a sample of the power of credit cards.

I know, I know. You are thinking about that damned interest rate. “I will be making the banks richer for just a trip? No! Not doing it!” Actually, there is a hack for that too.

If you don’t use them properly, then yes, they can be painful. They can ruin your credit, they can put you in a tough situation, they can make your life hell. Remember, you are paying interest fees and, with some cards, yearly fees as well. But, if you use them properly, that interest won’t hurt you. If you use them properly, you won’t get into debt.

A credit card isn’t debt until you make it debt.

Credit cards are not a cash replacement, its a substitute!

You don’t get a credit card because you don’t feel like paying cash or you don’t have enough cash to pay for an item. You get a credit card to use it for its benefits ONLY and pay it off every month.

Ever heard of the saying, “don’t buy it if you can’t afford it?” Well that’s how you use credit cards. That’s the secret sauce!

Don’t go out there and get a card then buy a whole bunch of crap that you can’t afford and pay the minimum balance.

Don’t be that guy (or gal).

Those are the people banks and creditors make money off of. Be that person who they don’t make money off of. Be that person that uses the bank instead of the other way around.

So how do you do that exactly? How do you use the bank instead of them using you?

Look for rewards

First, shop around. Look for cards that give you some type of benefit. If you are looking for points that you can redeem for vacations, flights, hotels and the like, look for cards in that area. If you want to get cash back on your purchases, look in that area. There are plenty of options out there. Some with yearly fees, some without.

For instance, if you love eating out, look for a card that gives you more than other cards in rewards at restaurants such as points or cash back. Some cards will give you 4X reward points for using it at restaurants. If you love staying and frequent at the Hilton, you can get a card that will give you lots of points or cash back for that too. The interest rates are important to the fact that you want to look for a competitive amount. So far I currently see around 24% with major cards. For the most part, you won’t worry about that because you are paying off your credit cards monthly or less. That’s the key here.

Pay off your credit card in full (Almost)

If you are looking to increase your credit while credit card hacking then pay off 99% of the bill prior to the statement closing date. This is called pre-paying your credit card.

When you do this, you avoid paying the interest rate on the 99%, keep your credit utilization at 1% (which is a BIG credit score booster) and reap all of the credit card benefits that the card gives.

You can leave a higher balance if you want to but keep in mind that you are paying interest on whatever balance that you leave. If you don’t like paying banks anything, then keep it at 0%, meaning pre-pay it in full every month however, since you are pre-paying it and keeping it at 0%, the banks won’t report on-time payments because when the statement closes and it’s at zero, it is as if you never used it. Yes this is great if you are looking to only get benefits from your card however, if you want to grow your credit, it won’t record anything because there isn’t anything to record.

Payment history is a strong factor in your credit score and if you want to increase it, then leave behind a 1% balance for the statement closing date. Sure, that 1% will be charged interest but if that’s, let’s say $1, that’s only a dollar being charged with that interest and that’s practically nothing. So if the credit card interest rate was 24%, that would come out to $1.24. As I said, nothing.

[Related: Understanding Your Credit: How Your Credit Scores are Calculated?]

Generally to benefit the most, in regards to your credit score, keeping your credit utilization between 0% and 9% would be best but you can go up to 29%. As I stated before, you will have to pay interest on that balance and the whole purpose of credit card hacking is to get the most benefits with paying little or nothing to the credit card issuer. So, I would stick with 1%.

[Related: 3 Credit Boosting Tips that You Can Implement Today]

What kind of benefits?

Well, take for instance, my American Express Gold Card. Currently, they offer 4X membership points for supermarkets and restaurants. Those are the two things that I do regularly, cook and eat out, so this card works great for me. I spend around $200 per week alone on groceries and around $100 per week at restaurants. That, plus a bonus of 50,000 points when I was approved (after spending $2,000 in three months) will give me over 100,000 points which I could use for a flight (at least $1000 credit), pre-pay a hotel (at least$700 credit), take a cruise (at least $700 credit) and more!

I see you rolling your eyes! But I have to spend $2,000! Getthafuckouttahere! (New Yorker talk).

Umm, remember what I said earlier? Use all credit cards as a substitute. If you can’t buy that television right now for cash, then you shouldn’t be using that credit card. If you can’t pay off that credit card bill in its entirety before the statement closing date, then you should not be using a credit card.

Use the card to make purchases on things that you would regularly purchase with your cash or actual debit card on hand. If you spend $200 on groceries normally, then use your card. If you pay $50 a week for gas using your debit card, use your credit card instead. Pay off all of your balances (leaving behind 0%-9%) prior to the statement date. If you have multiple accounts, calculate your total balance on all of the accounts so that if you add them together, they total 0%-9%. If you have multiple accounts, make sure that each of the account has a balance. Shoot, the balance can be $1. You can actively leave, exactly a $1 balance on each of your accounts and pay it off when you get your bill due date. Simple. That’s how you cheat the system, keep on having great credit, and take your family on a vacation!

This isn’t for people who can’t manage money. If you are having issues with controlling yourself, then stay away from credit cards and loans all together. This strategy is for those who have the discipline and self control. For those of you who can’t control yourself, check out Dave Ramsey’s book below. I followed his ways until I got out of debt, and even now I keep some of this strategies in mind but use credit to benefit from the rewards that they give. Are there any other reasons why I would use credit cards?

Why yes, yes there is.

Sure the points are great and my Amex card gives me more points than I had mentioned before but they also give me security. What kind of security? Well, with anything purchased on the card, if it gets lost, damaged, or stolen within 90 days (longer in other states) I can get it replaced for free through Amex. They also give me extended warrantees for anything purchased with the card for free. There are other free perks but you can check it all out here.

That’s about it really.

If you pre-pay your accounts, leaving behind 1% (or a dollar) in your accounts, you will be able to reap the credit score benefits as well as the benefits from rewards and cash back cards without paying tons of interest.

Be Smart. Buy only what you can afford and you will be fine.

Have anything else you would like to add? Please feel free to add below!

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