Cheap Money – Debt and Credit Part 2: A Credit Card Can be Your Friend

I called this article Cheap Money to stick to my cheap naming theme, but it should actually be called ‘Free Money’. Why? Because you can get money for free by following my guide below.

If you’ve read any articles lately from people trying to get out of debt (I like to call them credophobics, because they are afraid they can’t manage credit), they will tell you to burn your credit cards. The truth is credit cards are not your enemy; interest charges are your enemy.

When I was younger, I was also a credophobic because my parents were always in debt. I vowed to never get into that mess. As I got older and wiser, I learned that credit cards are wonderful as long as you have financial discipline. Personally, I earn income with my credit card and I can also wait 30 to 45 days before I have to pay for my purchases and expenses. How can you not like that?

So, here are the rules you should follow so you, too, can get cheap money:

1. Apply for a new credit card. It must have no annual fee and must pay cash back (usually around 1%). The annual percentage rate doesn’t matter, because you aren’t going to pay interest. You won’t pay interest, because of step 4 below.

*as a side note, I was reading another site that gave this same tip about credit cards and the guy recommended a card to readers that has a $97 annual fee. What kind of advice is THAT for helping people? Maybe he gets a commission out of that fee, but who knows.

2. Use this card only for monthly purchases and expenses that you have the funds to pay for.

3. Contact the card company and put a limit on it. If your normal monthly expenditures are $1000, then that would be the limit you should request. This card is NOT to be used for spontaneous buying.

4. Always, always, always pay the whole balance BEFORE the due date. Let me stress this: Always pay the WHOLE balance before the due date. If you don’t, you’ll be charged interest for the whole balance. And that blows the whole cheap money concept.

5. Use the new card for as many of your monthly purchases and expenses as you can, because you’ll be spending the money anyway. Why not earn cash back for everything you spend? I realize you can’t use the card for everything. Some organizations may not accept that type of payment and others charge a fee when you use a credit card. I remember my university wanted to charge me a 3% fee. In those cases, of course you should not use the card.

6. Do not use your old credit cards any more. Just concentrate on paying them off. Do your best to pay them down as soon as possible so you can get out of debt. This was covered in Part 1, Managing Debt.

I know this formula won’t work for everyone, but I hope it helps some people out. If my writing isn’t completely clear, feel free to leave a comment and ask me for clarification. I’ve been debt free practically my whole life and now I earn cheap money by using credit. Of course, my mastery of the art of cheap living has been a huge factor. Live cheap and prosper.

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2 Responses to “Cheap Money – Debt and Credit Part 2: A Credit Card Can be Your Friend”

  1. Great insight! I’ve bookmarked your site.

  2. Thanks Uta. I’m glad you found some of my words useful. :-)