Run All Your Expenses Through Credit Cards

A good personal finance rule (and business finance) is to run all your expenses through credit cards.

To clarify, I am not advocating or advising you to use credit to subsidize your lifestyle. Debt is generally not your friend, unless you are using it to leverage yourself into an appreciating asset (like a house) or an investment in yourself (like education for a career path).

I am talking about running your expenses and natural burn rate through credit cards so you can earn points on money that you have to spend anyway to live.

This is a good idea for five reasons:

1. You build credit which makes it easier to do things like get a mortgage if you want to buy a house, take out a loan for your business, or go back to school.

2. You can earn double, triple, or sometimes even 5x the points on expenses that you have to pay anyway. Each time you get gas, groceries, shop online or pay a utility bill, you can be getting points back that allow you to purchase things like vacations at not additional cost. See below for what cards I use to get the most bang for your buck.

3. You can dispute charges. When you give a vendor your credit card information, they don't have access to your actual money. They have access to a card that has a credit line and limit. If for any reason you have to dispute a charge, most credit card companies will credit you the amount while they investigate the matter. Since the credit card company is responsible for paying the vendor, and you are responsible for paying the credit card company, 99% of times disputing a charge will always work out in your favor, so long as you don't abuse the feature. I always run my subscription services through my credit cards so if I forget to cancel one, I can cancel the subscription even after they've charged me, then dispute the claim to my credit card company. Once they look into the matter, they'll see I have canceled my subscription and will have credit my account.

4. You can monitor your credit report. Your credit card app will often have a built in feature which will give you updates on your credit score. This is especially handy to know if your score has gone up or down and why, which add to your financial literacy. Additionally, you can monitor your credit report so that, in the off chance your identity has been stolen, you can take steps to protect yourself and restore your identity.

5. Your bank will give you deals. If you bank with someone and have a history of paying your bills on time, you are a good business partner. A bank will often times try to reward you or send you offers in an effort to get you to bank with them more, such as low interest loans, high interest saving accounts, or cash bonuses for opening another account. While I think it is a financial best practice to have accounts at separate banks for each type (credit and finance at one, checking at another, savings at a third) it might make sense to get a car or business loan at the bank you have already built credit with.

All of these tips come with the caveat that you MUST pay off your balance in FULL at the end of every pay period. If you do not, then all of these tips are useless because you are now paying the credit card company sometimes as much as 30% interest on your purchases, and no amount of points or perks can offset such a cost.