Reprinted from my personal blogOkay, I can't believe I just used a capitalistic, consumeristic tagline as my title.
But seriously, friends, it makes so much sense to use a Discover credit card for as many monthly purchases as possible and then earn money back.
Disclaimer: Only use credit cards if you can pay off the entire balance each month! I am not advocating that you start racking up credit card debt. On the contrary! Credit cards can be super-dangerous because they can deceive you into thinking you have more money than you do. And honestly, it's stupid to pay money for money (which is what we do if we carry credit card debt) unless we absolutely have to (e.g., student loans, car loans, mortgages, emergencies, etc.).
I don't mean to pontificate from my soapbox. It's your life. I'm just saying that Matt and I received $571.90 from Discover because we put everything on our Discover credit card and it helped us accumulate a serious cashback bonus after a significant amount of time.
I have no idea how long we've been accumulating that bonus, but I do know it's completely free. We don't even pay for the cost of a stamp to send in our bill each month. Instead, we send an electronic check from our ING Direct account. Voila!
I know some people like using debit cards or cash in their wallets because there's a finite amount of money and they can see the supply getting depleted each time they buy something. I like that feeling, too, which is why I keep an index card in my wallet and keep track of how much I'm spending. I start with our month allowance for groceries, joint entertainment (including dinner out), dog bills, medicines, hygiene, etc. (which is $1,060, in case you're curious) and subtract the cost of whatever we spend. That way, I get the feeling of a finite amount, but I can still use my Discover card. I even try to pay some of our bills on our Discover card.
The only hitch is that Discover isn't accepted everywhere (like our favorite ice-cream store), but we just carry a backup Visa card and use it whenever necessary.
Discover isn't the only company that offers cashback bonuses. Julia from Color Me Green mentioned that you can visit www.bankrate.com to compare options.
Hooray for free money!
9 comments:
We have a Bank of America card that does the same thing for Amazon.com gift certificates.
I should say this, though-- in life, nothing is free. The merchants that you use the credit cards at pay for your rewards program, for better or for worse. Check out this article at the NY Times: http://www.nytimes.com/2010/01/09/your-money/credit-and-debit-cards/09money.html The end of the article has ways to try and do this with less guilt, so we try our darndest to use cash at our smaller merchants.
@ Sarah: Oh no! I didn't realize I was perpetuating a reverse Robin hood effect. I'll have to read that article more carefully. Thanks!
I'm a fan of the credit card as well, for the same reason. My favorite right now is American Express Blue. For the first $6500 you spend annually you get 1.5% back on everyday expenses (groceries, gas, drugstore, etc) and 0.5% on everything else. After that you get 5% back on every day expenses and 1.25% on everything else. They automatically send you a check (or give you a credit on your statement) and I regularly earn over $200 a year with it.
I've been doing this for years as a way to stick it to "the man" and make the big banks pay me... but yes, the cost to smaller merchants is worrisome.
Also, if you read the Better World Shopping Guide (which I learned about on this blog and then purchased--thanks!), the big credit card companies get low grades (Discover & VISA get D+). On the other hand, it is nice to get the cash reward. Our Chase card gives us 1-3% cash back (depending on what is purchased), and Chase gets a C+, fyi. Just try to keep your savings account at a local credit union (B grade) or socially responsible bank (we use Wainwright).
Yes to the article and the comments. I use my Amex Blue whenever I can (I'm planning to pay for the honeymoon flight with it, after yeeeears of credit card use - paid in full at the end of the month.) But I NEVER use it at small merchants. I use debit or cash for that.
Of course, the problem with credit cards is that most people can't control their spending. But you are right. You can earn money back with the right card.
Thank you for writing about joint finances. This is one of the stickiest parts of our partnership, and I LOVE LOVE LOVE that in your discussion of marriage and joint living, you address this very central, realistic issue. I always appreciate your financial advice, even if it may not apply to my partner and I just yet.
I'm 23 and have never had a credit card. I've never felt comfortable with credit companies (they always seem to be doing something terrible to someone, somewhere). I'm not sure what this does to my "credit report" or what affect it'll have when we want to get a house, or a car, or something like that. We stick to debit cards, and while we haven't yet committed to an awesome joint financial plan (like Sara's), we're working on it. Thanks for putting the info out there though, at least I've learned that there's the option of gaining money back while spending it.
We should be careful in using credit cards, they can screw up our 1 month budget if we don't use it well...
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