The Credit Card Game

Credit cards have their perks and they have their drawbacks. It is important you know both and what is best for you.
 
Perks
   · Rewards Programs
   · Easy/Fast – ALSO a drawback…
   · Don’t have to carry a lot of cash
 
Drawbacks
    · Spend more….face it, it is true!
    · Interest, if you carry a balance
    · Must remember to pay the bill
    · There is an electronic record of your purchases
 
Everyone cannot handle credit cards. Some people keep spending until they hit their limit. If you hit your limit and can’t pay it off when the bill is due, consider that GAME OVER….and you lose! If you hit game over it is time to cut up the card, pay off the debt and stick to cash from that point forward, unless/until you really change how you spend money.

So let me teach you how to play this game. Navigating through both the perks and drawbacks is key! My husband and I play this game every month. We have two major credit cards with all relatively low limits, we will call them Card A and Card B. Card B gets 2 percent back on gas every month and we only use that card for gas. Card A rotates their rewards, so some months we get 5% back on groceries, gas, home improvement, or a few other categories. If it is a month we get 5% back on gas on Card A, we switch the gas to Card A so we can make an additional 3 percent on our purchase. We want to make money when we have to spend money…who doesn’t right!?!?

Sometimes it can pay to use a credit card, even if it looks like you are spending more money. For instance:

The gas pump usually says a cash price and a credit price in Michigan (and a few other states):

Cash: $3.40

Credit: $3.50

If you are getting 5% back in rewards, even with the credit price you are essentially paying $3.325 per gallon, which is less than the cash price by a few cents per gallon. We all know money ads up quick in the gas tank!

However, if you are only getting 2% back you are paying $3.43 per gallon, where if you had cash you would only pay $3.40 per gallon, and again that few cents adds up quick!

It is important to calculate the credit card “penalty” price. If something costs more you need to evaluate if it is worth it. An easy way to calculate the final price is to multiply the price by the percentage you will pay after your get your rewards. So if you get 5% back you multiply the price by .95 and you get your final price. If you get 2% in rewards you would multiply the price by .98 and so on and so forth...

My husband and I put all of our utility bills (unless there are fees…watch out for fees) on the credit card. This way we get the rewards and the companies do not have direct access to our bank account. When it comes to other purchases such as groceries and other miscellaneous items, we make sure to keep a close eye on the bill(s), because we want to be sure we can pay it at the end of the month. Credit cards are by no means free money! It is important that you stick to your budget even though the money is electronic. After all, you still have to pay the bill at the end of the month out of your checking account!

If you want to spend less or have a hard time spending less with a credit card, but still want the rewards, then grab an envelope and every time you swipe your card, put cash in the envelope. This allows you to have the best of both worlds—you get the rewards and you are spending what you can afford to pay in cash.

Proceed in this game with caution. As we know, for every game, there must be rules.

1. If you can't afford to pay cash for it, don’t swipe your card, leave it on the shelf

2. Pay your full balance every month

3. When you swipe your card, rather than paying cash, make sure you are not losing money or paying more for something in the long run (see gas example above)

A Special Note:

If you are buying from a small business, please try to pay cash. They really appreciate when they don’t have to pay the credit card fee and it is always good to support your local small businesses! :)

 

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