The Cost of Playing the Credit Card Game

If you know me, you know I am a HUGE fan of paying with a credit card whenever possible… it doesn’t even have to be my own purchase nor my own money. You never pay full price and there are SO many other perks. My travel gurus out there such as one of my favorites Chris Guillebeau even credit (pun intended) using cards as a huge part of their travel hacking strategies. On the other hand, many of my financial gurus such as Suze Orman and Dave Ramsey have warned against using credit cards.

Why are some people die hard fans and others won’t touch a credit card with a ten-foot pole? Are credit cards worth the cost of going so deep into compounding debt? Do you really need a credit card? Which one should you get and why?

Before I answer these questions, let me take a stroll down memory lane to share how I first became into credit cards…

I became officially obsessed with personal finance, ie credit cards, back in 2007. I was a college sophomore, right before that economical mess that has seemed to define my generation a bit. It started with a mistake of refreshing the page when applying for my first credit card and ending up with two. I got two Chase Freedom cards in the mail and after some research, I decided that the best thing to do was to just call and decline one. The customer service rep asked if I wanted to combine the credit limits. I just mumbled, “Uhhhh suuure, why not.” which took my already high 10k limit on each to a whopping 20k. I knew absolutely nothing about debt nor credit card perks, but when I was given $150 for doing almost nothing, but using the card, I was sold. Since, I have been super responsible with paying on time and have never been denied a credit card application. The rest is history. But then again, it’s not. I use my cards almost every day and I have used them since to help pay themselves off and to travel as much as I can.

So what are all these credit card perks I keep mentioning that I have? Well, here you go…

  1. No annual fee
  2. No foreign transaction fees (usually plastics charge 1-3% Eek)
  3. Link to Mint.com where I track all my transactions
  4. Immediate text/email transaction alerts when I use the card
  5. Autopay so I never have an outstanding balance
  6. 24 hour card replacement
  7. $24k credit limit
  8. 30% cash back/miles intro bonus
  9. Up to 25% cash back on online purchases – my favorites include flights and hotels.
  10. 5% cash back on activated quarterly bonus categories up to $1,500 in combined purchases like gas stations, local commuter transport, grocery/drug stores
  11. 3% on travel and supermarkets up to 6k
  12. 2% cash back on everything else
  13. 10% more cash back when redeemed to linked account
  14. No minimum or expiration date to redeem cash back
  15. FICO score updates
  16. Zero Liability Protection which means you won’t be held responsible for unauthorized charges made with your card or account information.
  17. 24/7 Access to a Customer Service Specialist gives direct access to a customer service specialist ready to assist you anytime, from anywhere in the world with your travel, shopping, dining, entertainment and everyday needs.
  18. Purchase Protection which covers your new purchases for 120 days against damage or theft up to $500 per claim and $50,000 per account.
  19. Price Protection which means if a card purchase you made in the U.S. is advertised for less in print or online within 90 days, you can be reimbursed the difference up to $500 per item, $2,500 per year. I just give them the item to search and they’ll let me know whether they have found you a better price.
  20. Extended Warranty Protection which extends the time period of the U.S. manufacturer’s warranty by an additional 24 months, on eligible warranties of three years or less.
  21. Return Protection which means you can be reimbursed for eligible items that the store won’t take back within 90 days of purchase, up to $250 an item, $1,000 a year.
  22. Trip Cancellation/Trip Interruption Insurance which means if your trip is canceled or cut short by sickness, severe weather, and other covered situations, you can be reimbursed up to $10,000 per trip for your pre-paid, non-refundable travel expenses, including passenger fares, tours, and hotels.
  23. Auto Rental Collision Damage Waiver which provides reimbursement up to the actual cash value of the vehicle for theft and collision damage for most rental cars in the U.S. and abroad.
  24. Baggage Delay Insurance reimburses you for essential purchases like toiletries and clothing for baggage delays over 6 hours by passenger carrier up to $100 a day for 5 days plus trip Delay Reimbursement which reimburses you if you (and your fam) are delayed more than 12 hours or requires an overnight stay for meals & lodging, up to $500 per ticket.
  25. Access to purchase tickets to “thousands of events annually, including presale tickets and VIP packages to the year’s hottest concerts, sporting events, dining experiences and family entertainment, plus complimentary movie screenings and more” with updates via an email newsletter
  26. 1:1 Points transfer to United MileagePlus, Southwest Rapid Rewards, British Airways Executive Club, Virgin Atlantic Flying Club, Korean Airlines SkyPass, Singapore KrisFlyer. Cathay Pacific Asia Miles, EVA Air Infinity MileageLands, Etihad Guest, Air France / KLM Flying Blue, Garuda Indonesia Frequent Flyer, Malaysia Airlines Enrich, Qantas Frequent Flyer, Qatar Airways Privilege Club, Thai Airways Royal Orchid Plus, Air Canada Aeroplan, Air Berlin Top Bonus, Air China Companion, Air New Zealand Airpoints, Alaska Airlines Mileage Plan, Alitalia MilleMiglia, All Nippon Airways (ANA) Mileage Club, American Airlines AAdvantage, Asiana Airlines, Delta Air Lines SkyMiles, Emirates Skywards, Hawaiian Miles, Japan Airlines (JAL) Mileage Bank, Lufthansa Miles, Saudi Arabian Alfursan, Hotels include Westin, W, Sheraton, Le Meridien, Four Points by Sheraton, Hilton HHonors, Marriott Rewards, Hyatt Gold Passport, IHG Club (Holiday Inn, Intercontinental, Crowne Plaza), Ritz-Carlton Rewards

If you’re thinking WOW, I’ve never heard of this card (congrats on knowing card perks) or if you’re thinking WOW, I should get a credit card (not so fast, dear reader), I do have to tell you: These are the best perks of all my credit cards combined. There is no perfect credit card. There are only credit card strategies, and they have all have to do with you – how you handle your credit and what you want in life.

First and foremost, before I get into choosing a card, I deeply implore you to treat your spending on a credit card as cash that you have available to you now – not money you will have after your next paycheck or when you mom pays you back or when you get your refund. Having a balance on your credit card can cost, according to Investopedia, an “astronomical” average of 12.31%. Many people use sticker shock to get people to realize the danger of this. This is from creditit.com

Most credit card issuers require a minimum payment of 1% to 2% of your balance. So let’s assume, for example, you owe $6,000 on a card with a 15% annual percentage rate (APR) and your issuer requires 2% of that balance as a minimum payment. You’d wind up paying close to around $9,184 in interest, were you to only make that $120 minimum for the full 355 months it would take to pay that $6,000 balance down.

They go on to use the words: anxiety causing, tempting, dire consequences, dragging, etc. to explain credit card debt. Just don’t do it! I do understand that in many cases that people have used credit cards as their very last resort or have used a card with 0% APR. At this point, a new credit card may not be your next best move – building emergency savings so you never have to repeat that situation would be. Bottom line: Being on the losing side of credit cards sucks.

Phew! Glad I got that out of the way. Now here’s the good stuff. Here’s how to get on the winning side. Here are some tips I have for optimizing your credit card game before applying for a credit card:

  1. Know that you’re going to get approved before you apply. Here’s a checklist from NerdWallet to make sure. When you apply for a card they will pull your information aka a ‘hard inquiry’ or a ‘hard pull’ which could lower your credit score by a few points. Apply when you know you’ll get the credit so it’s worth it.
  2. Figure out what you want in your wallet. If you see a perk that you don’t already have, find out which cards have it. NerdWallet’s card search tool is great and BankRate has one too.
  3. Compare any bonuses between cards. This, to me, is the most complicated part, but once you figure that you’ll get approved and what you want in a card, your list of credit cards to research should be more focused. Cash back is pretty straight forward, however many cards give point bonuses which basically means you’ll have to learn another currency, in a sense. My cards usually value about a cent per point, so I simplify my life by rounding from there. Miles trip me up so I don’t tend to mess with those. How Hawaii can be less than 3k miles from California but “cost” 50k miles blows my mind. Yeah… I have some learning to do too. Meanwhile, ThePointsGuy  and ViewFromTheWing do a better job at points math than I’ll ever do.
  4. Look for the best intro bonuses for the card you want (if there is an intro bonus). A great tool to use for evaluating if you’re getting the best possible bonus is  USCreditCardGuide.com‘s historical analysis on offers. If you are not given the best offer right away, you may be able to ask directly (I remember increasing my Chase Sapphire bonus because I knew it was 5k points lower than a friend’s offer!). You may just have to wait just like this post by the Points Guy details. It may have been written in 2014, but it’s still applicable.
  5. If there is an offer, plan how you’ll make the minimum spend. I’m a big fan of manufactured spending to meet requirements without spending unnecessarily spending. You want the offer, not the debt!
  6. After being approved for your card, plan your next move. See what card you’ll open in 6 months, a year, or more. Just because you have many cards, doesn’t mean you have to always use them all. That would be ridiculous! Use them temporarily for the intro bonuses, when you need the perks (write them down if you need to!), and to increase your overall credit line. Just don’t lose them even if the card has purchase protection. That’s definitely not worth the risk. If the card is no longer worth the annual fee, ask to downside or if needed, cancel. Do know that canceling you card may affect your score however, because it reduces your overall credit line and alters the average age of your credit card. It might be better to just take a scissor and snip it. If needed, hit up other credit card geeks and ask for their opinions. Some bloggers and consultants even offer free personal advice. There are things you may not know until you have the card. Like how much you hate the Ally credit card even though you *love* their savings account. I’ll save that for another post.
  7. On the same note of not losing your card, don’t lose the perks by not maximizing them. Stay organized! I’m very low tech in that I write down which cards are good for what. For example, I know for the past 3 months, I get 5% cash back in local transportation because I taped a piece of paper on an area of my card that won’t get in the way of swiping/chip reading. I also scribble my credit limits on them and update it every few months. With the right budgeting (currently I use YNAB), I don’t have to worry about auto payments because, first and foremost, I make sure I always have the cash in my checking account. Many credit card junkies like Miles to Memories and The Points Guy share how they organize their collection of dozens of cards. Also, apps like Wallaby can help with organizing your cards. Keep the ones you’ll use in your wallet and keep the rest in a safe place 🙂 Pro-tip, save the phone numbers for each of your credit cards on your phone in the rare case that any of them get lost.

Now, the moment you all (maybe) have been waiting for. What credit cards do I use, eh?

Ahem, I have 8: Chase’s Freedom and Sapphire, Citi’s ThankYou Preferred and Double Cash, American Express’ Blue Cash, Ally’s CashBack, Capital One’s Quicksilver, and New York & Company’s card. Currently in my wallet: my Sapphire for 2x points when I eat out, Amex for 3x with supermarkets, and Double Cash for everything else.

How do you play the credit card game? Has credit card usage cost you anything? Have you ever taken advantage of credit cards realizing it could actually cost you to not play the credit card game? Please share 🙂


Published on March 16, 2017

Updated on March 17, 2017