Dave Ramsey holds a special place in my heart and my podcast playlist. For a long time, specifically before I was married and had a more firm grasp on my finances, he intimidated me. I’d switch radio stations as soon as I heard that slow southern drawl remind me of all my financial misdeeds and student loan debt. Now, though, I tune in for at least a few minutes each day to hear a good newlywed debt-free scream or some out-of-control spenders get a verbal spanking. Dave has really inspired me and TJ to maintain our budget and set a goal to pay off our house as soon as we can. But there is one pretty big ideal where Dave and I part ways. Dave, please don’t hate us, but TJ and I have credit cards.
About two dozen open lines of credit at any given time, to be exact.
Now, before you assemble with pitchforks and torches and surround our home like I’m Frankenstein’s monster, let me explain. We don’t believe in debt, and we never carry a balance on any of our cards. They are paid in full every single month. In fact, we have every card we open synchronize with the 27th of each month so all the bills are due on the same day for easier bookkeeping. Why use credit cards when we don’t intend to use them as they were intended? The bonuses, of course!
Before I get into the nitty gritty, I must first give a word of caution. If open lines of credit are as tempting for you as the flashing “Hot Now” sign at Krispy Kreme is for me, then this method is not for you. If your credit score is below 700, stay away from this strategy. If you don’t like keeping detailed notes and spreadsheets about spend requirements, due dates, and points bonuses, make like a tree and get outta here.
Still here? Great!
Here’s how TJ and I have avoided paying for travel for our entire marriage. We find credit cards with great travel sign-up bonuses, meet the minimum spend requirements, stash the miles and points, and hang onto the cards until their annual fee comes up the next year. If it’s an option, we downgrade it to a no-fee version of that same card. Since canceling lines of credit dings your credit score, we try to avoid it if we can. If we’re able to downgrade, we hang on to the card in a filing cabinet and let it collect dust. If we’re unable to downgrade, we go ahead and cancel the card. Our credit scores have stayed really high using this method.
In order to meet the minimum spend requirements, we just use that card for all our purchases until the desired target has been reached. Then we file that card away as mentioned above and use the next card. If we know we have a big purchase coming up, like new carpet for the house or a new king-size bed for our room, we get cards with higher spend requirements (and usually higher bonus structures) to maximize the opportunities.
The points we have accumulated over the years have piled into so many different airlines, hotels, and loyalty programs, it would be impossible to keep track of it all without a spreadsheet. Our points and miles budget was born from our original budget out of this necessity. Another free online tool, www.awardwallet.com, keeps track of your points balances for you by linking to your loyalty accounts similar to the way mint.com links to your bank accounts. The spreadsheet we created to help keep track of how much we need to spend by certain deadlines is used in tandem with Award Wallet to help us know how many points we have and when they expire. We also pay close attention to whether certain loyalty programs will be going through points devaluation phase, which means we’ll need to use up those points before that happens to maximize their value.
I didn’t believe this could all actually work when TJ told me about it after our wedding. It felt surreal to book our first week-long trip to Hawaii with some American Airlines points we’d accumulated by signing up for just two cards. I half expected the concierge to deny us our room key because it couldn’t be real that this gorgeous hotel cost us nothing. It wasn’t until we walked into our twentieth floor, ocean-view suite that our jaws dropped and the reality hit us. We had scored the vacation of a lifetime for practically no money. Pinch me!
Since then, we’ve been to Cancun, Kauai, San Diego, and a whole variety of other domestic locations by paying with points. We’re currently planning another trip to Maui and possibly England so I can geek out and see Harry Potter and the Cursed Child and get a subsequent restraining order from JK Rowling when I inevitably stalk her every location. We love the financial freedom traveling for free brings us. The cash we may have used toward an annual trip can instead be used to help pay down our home, buy a car, drop into investments, or just add to our emergency fund. And I’ll admit traveling is a lot more enjoyable when you know you’re not paying out the nose for it.
How do vacations factor into your budget? Do you like the points idea, or is paying with cash the only way to go?