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    How To Use Your Credit Card To Build Wealth And Avoid Bad Debt

    Last Modified: Mar 09, 2022By Shirla Medford

    We have picked up a very useful phase from our son, ‘do de maths’. So, we ‘do de maths’ even when we go to get food on our no cook days.

    For example, we would usually buy a couple snack boxes at 17.00 each (spending 34.00). One day we noticed a family box at 28.00 that would give each of us the same amount of food as the snack boxes, of course we bought the family box instead. The restaurant would not have been very happy about this, but we certainly were. An instant saving of 6.00.

    We are always looking at ways to build our wealth, no matter how small. The ole saying ‘take care of de cents and de dollars will take care of itself’ is a gem of a saying.

    This article is about how we use our credit cards to benefit from cash back and being able to use points accumulated to buy plane tickets.

    Credit Cards with Benefits

    Cash back

    In my opinion, these are the way to go. When I was introduced to the Mastercard with cash back benefits, I wasted no time in applying. You are given a percentage of cash back on all purchases made on this card, anywhere from 1% to 4% depending on what was purchased.

    Frequent Flyer

    When my son graduated high school, he was going overseas to study. I was introduced to another type of Mastercard – this one was offering frequent-flyer miles on all purchases made. This means you’ll accumulate points towards the purchase of a plane ticket while making everyday purchases you would have made anyway.

    Our Personal Strategy

    Here’s an example of how you can mix and match cards.

    My husband and I have the master card cash back cards. However, the three of us share a frequent-flyer miles card (one account three cards).

    We agreed that the frequent-flyer miles card was to be used solely by our son since will be overseas. We wanted him to have the security in case of an emergency.

    In addition, all his bills including rent were to be paid using this card.

    Key: This way he will be accumulating points to fly home while paying rent. Imagine getting a free flight for paying your rent.

    On the other hand, the frequent-flyer miles card will only be used by my husband or myself if there is a problem with our cash back card. Of course, we’d pass the message on to our son so that he always knows how much credit is available on the card. You need to make sure everyone is communicating so that you don’t overspend and incur fees.

    Regarding the cash back card, we agreed to make all our payments and purchases using the credit card to maximize our cash back benefits.

    Rules for Making Credit Cards Work

    For this to work to your benefit though, it will take some discipline. You need to:

    • Set and keep a monthly spending limit, regardless of the credit limit on the card
    • Run all payments and purchases through your cash back card
    • Run all payments and purchases through the frequent-flyer miles card
    • Avoid using your cash, keep that to fully pay off your credit card on the statement due date
    • Keep a daily balance on each card, so that you know when you have reached your spending limit
    • Know your cutoff date for spending
    • MOST IMPORTANTLY – pay off the full amount due on the Statement on or before the statement due date

    Knowing your cutoff date for spending and your budget, and having the ability to stick to them, always keeps you in control of your credit card and not the other way around.

    Live Example

    This is how I do it:

    SPENDING PERIOD JUNE 8TH TO JULY 7TH

    BUDGET: 2500.00

    By July 6th I have spent 2300.00 remember I keep a daily balance of credit card purchases

    Balance: 200.00

    Let’s say I want to make a purchase totaling 250.00 – overbudget by 50.00

    If I know how the additional 50.00 can be paid off, I go ahead and make the purchase.

    If not, I buy what I can for the 200.00 and complete the purchase on July 8th, the beginning of the next cycle.

    Better yet if I can hold on until July 8th without any further spending, I would do so, and my budget for the next period would go up by 200.00.

    Your Credit Card Will Bring Gifts at the End of The Year

    After doing all of this, here is what we look forward to at the end of each year:

    The Cash Back From Throughout The Year

    CASH BACK – The amount is shown on the card every month and it accumulates until the end of the year. The cash back is credited to your card in November. I get anywhere from nine hundred dollars and up in cash back, depending on my spending throughout the year.

    I also do my biggest shopping during this time to benefit from the additional credit. This is an amount of $900.00 or more that I would not have to pay out.

    The Flight Your Worked For

    FREQUENT FLYER MILES – the points accumulate, and my son uses them to purchase his plane ticket to come home at the end of the year, probably the most expensive time of the year to travel.

    Ticket usually cost around three thousand dollars (BD$3000.00). I don’t have to save for that anymore.

    Stick to the Rules

    Let me reiterate, it takes discipline to do this.

    • Never use your credit card AND spend you cash at the same time – save your cash if you pay with your credit card
    • Pay off your credit card at end of the month, on or before the statement due date
    • Avoid paying late fees and/or interest fees – you will not be saving if you must pay additional fees
    • Do not make ANY cash advance transactions because they immediately incur interest fees

    Here’s the problem if you don’t follow this.

    If you only pay some of your credit card debt, it will incur interest. This amount accumulates, and overtime it becomes harder to pay off.

    If your card payments are late, you will be charged a late fee, this goes on to your card debt as well.

    And as stated above, avoid cash advances as the interest is charged immediately.

    Even with bad spending habits you can still earn cash back and frequent flyer miles. However, all the benefits would have been negated by high interest fees and late fees. Even more, bad credit management can damage your credit score which can lead to a world of problems in itself.

    CONCLUSION

    This absolutely works, but with lots of effort and self-will. Be honest with yourself, if this not you, stick to your Debit Card or cash whichever works for you.


    Shirla is the Coordinator of SUSU Magazine and Director at SM Printing Services.


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