If you’re looking into options of how to pay off some credit card debt go to this blog post instead. This blog is more tailored on how you can use credit cards to your advantage.
Home Renovation – from our experience
Figure out how you can use credit cards than benefits you not the credit card companies. When my wife and I first purchased our first home we renovated the whole house. I would have to say at the time we watched a lot of HGTV and we wanted everything, taking out walls, the “Open Foreplan”, hardwood etc., if you watch these shows you know exactly what I’m talking about. Before we got too deep we set a budget that would come out of our savings, about $40k. This figure took us a better part of 10 years to save but we decided that since this was our first house we wanted it to be ours. Instead of paying everything with cash, everything instead went to two new credit card we opened, one with American Express, 0% interest for 12 months and one with Lowes, 0% for 18 months. At the time our savings account returned a little over 1%, annually so the best route for us was to use these two credit cards instead of paying the expenses out right. The second step is the step that is crucial and most people forget, right after we finished the renovations, we looked at both credit cards and divided the balances by the amount of months left in the free interest period. We divided the balance by the months left in the free interest period, less one month just in case. The catch is that if you miss the last payment or you go over even just 1 day you will instantly have to pay all the accumulated interest for the entire amount. Make sure you set an automatic payment and track it every few months that everything is running smoothly. Disciple is key. In this scenario we got close to 20k at 0% interest while inflation was at 2% annually and our savings returned 1%. On top of the 5% discounts we got from Lowes for the large purchases we got an additional net benefit of 3% (2% inflation, 1% savings return) while paying no interest.
Purchases and Everything else – from our experience
Here you have plenty of options and it can get very confusing and overwhelming especially when you start with different credit cards with different point system.
From our experience we have found that most point systems are rigged in the credit cards companies favor, usually returning a little over 1% in equivalence. We are strong believers in cash back credit cards and love them. You get your cash back and you do whatever you want with it. Not saying that point systems are all bad, for example currently we are benefiting from the South West Companion Pass. There are two credit cards in our wallets, one that’s cash back, the Costco Citi card, because we like shopping in bulk and splitting the cost with a shopping buddy, and the South West Visa Card for points.
We are frequent fliers and enjoy traveling, specially to Mexico on relaxing vacations. Last year I signed up for the South West Rapid Rewards Plus Credit Card when the 50k point bonus was active. Over the first two months we spent enough on the cards, and paid it off, to get the bonus and an additional 5k points. A few months later I signed up for the Premier Card while the 50k promo was still on, again we spend enough to get the 50k point with another 5k in paid transactions. This brought us to the 110k points we needed to get the South West Companion pass. Since we got the companion pass mid-way through the year we benefited the back end of the year and the following year. Southwest gives the companion pass for the current year you’ve earned it and the following year after that. (this was the case in 2017). Since you’ve earned the 110k points you can still use the points for your flights, you’re not trading the points in, you’ve earned them you can use them. So for the cost of $69 Plus Credit Card Annual Fee + $99 Premier Credit Card Fee we had a companion pass for 1 year and 4 months. For domestic flights booked with points you have to pay the $5.60 fee for both travelers. For International you have to pay the fee and governmental taxes. Our first trip to Mexico the round trip flights cost us a little under $200 and 20k 24k points. Just in that trip the two cards paid for themselves. Since that trip we’ve taking over a dozen domestic flights and have a trip schedule for the Cayman Islands this summer, roundtrip air fare cost us another $200 plus 10k points that would otherwise cost us at least double. We are in the process of planning at least one more long trip and 3 – 4 smaller trips with the reaming points. The entire time of these trips we’ve only been using the south west credit card since we fly two on the points of one.
In total by the end of this benefit we would have had 3 international flights, over 12 domestic flights something that would have cost us around 5k for the price of less than 1k. I think this is a pretty sweet deal.
If you’re intend on signing up for the South West Credit Card use our link, it would help us out as we would get 5,000 points for referring you. Happy travels.
If you have other examples that others would find helpful comment below with your suggestions.