Our Credit Card Rules

Credit Cards: The Rules and Rewards

Hey peeps, it’s Johnny! You know, that other person that writes all of the boring, no-nonsense posts around here. Wait, why is your cursor moving toward the “Exit” button? Hey, stop! Just lend me your eyes for three minutes. So Joanna’s been running the show the last few weeks like a champ while I’ve been grinding away at the 9-5. Life’s good, work’s good, bank accounts are good-ish. No complaints from this guy.

We’ve discussed credit cards here and there, but it’s been quite some time since we delved into our deepest, darkest feelings on those swipe-happy plastic demons.

Here’s a brief background on our “It’s complicated” relationship with credits cards. We use them. There ain’t no cash-only business happening in this house. For those firmly in the cash-only camp, you might want to sit down for this next revelation: we use them for nearly every.single.purchase. Our recent trip to NYC was the first time I was forced to visit an ATM and carry cash in almost a year.

However reckless all of this may sound, I can assure you that when it comes to credit cards, Joanna and I know we’re packing some dangerous heat in our wallets. We were fortunate enough to never actually carry any credit card debt, but we’re well aware credit cards are the gateway drug for many a Debt Monster victim. For that very reason, we follow some hard and fast rules when it comes to plastics. And by playing by those rules, we’re able to make it rain (or at least sprinkle) with rewards.


Never, Ever, EVER Carry A Balance

This is the cardinal rule. If you’re unsure if you can keep it, don’t get near credit cards. We never use credit cards as a line of credit — they’re essentially our debit cards. We’re accountable for each and every cent at the end of the month. I’m borderline OCD about this, so sometimes, I’ll check and pay off our balances three or four times a month. And at the beginning of every month, I make one final payment on all of our cards before calculating our net worth. We start every month with a zeroed out balance. Clear conscience, full credit card payment, can’t lose. I think that’s how it goes.

The Budget Rules All

Credit card companies want you to think that every time you swipe their fancy card, you’re spending their money, not yours. How lovely that they would be so kind to buy pay for this glorious feast of Taco Bell Doritos Locos tacos. All of that is wrong — minus the tacos. Those are always right. That money is coming out of your pocket! If that’s not what you think every time you swipe a credit card, cut them up now. We make it a point to enter every transaction — credit card or otherwise — into our budget as soon as humanly possible. A credit card isn’t a “Get Out of Jail” card for our budget. Then what’s the point of using them, dumbface?! you may be thinking. Actually, none of you are thinking that because I read every single one of your comments, and that’s just not something you’d say. But if you’re thinking something along those lines but without the third-grade lexicon, read on.


Rewards (Literally)

The first reward for using credit cards (responsibly) is… rewards! Imagine that! For the last five years, our primary reward focus has been airline mile rewards. Flying on one of those big birds in the sky ain’t cheap, and if it weren’t for our credit card rewards, we probably wouldn’t have left the ground. We definitely don’t spend more in order to acquire more miles, but I have been known to pounce on some awesome credit card promotions. Here’s an article we recently wrote on DailyFinance about how we’ll fly free for the next two years.

Credit Score

I know some financial gurus (*cough*Dave Ramsey) would have you believe that your credit score doesn’t matter. But the truth is that having a good credit score is pretty helpful. Every time we’ve applied for an apartment rental, each of us had our credit checked. And since we follow our rules of paying down our balance every month, our credit scores are good. When we buy a home someday, having a strong credit score will play a huge role in landing us a lender and a more favorable mortgage rate. That’s what’s up.

So those are the rules of the credit card road. If it any time we stop keeping those rules, we do not pass Go, we do not collect our rewards, and we put our credit cards into a blender. And then we scatter the plastic ashes in some random aisle at Target, because that seems fitting.

What’s your credit card philosophy? Do you use them? Do you curse them like the plague? What are your rules and rewards?

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  • Reply Rachel June 27, 2014 at 7:43 am

    I used to do with my credit card what you guys do. Only I clearly don’t have the same amount of will power as you. I’ve had 2 credit cards over the years, not at the same time though, and the only reason I got the second one was because my wallet and phone were stolen and I was flying overseas the next day and needed to get a new phone. They never had very big limits, $3500 on the first one and only $1000 on the second. Both times I swore that I was going to just use it for bills I was going to have to pay for anyway, and put the money aside to pay it off at the end of the month. Both times it quickly spiralled to buying stuff that I really wanted straight away instead of waiting and saving up properly.
    I closed my second credit card at the beginning of last year, and have been using Debit MasterCards exclusively since. They give me the same functionality as a regular credit card, but I really truely can only spend the money that I have.
    That doesn’t stop the bank trying to offer me cards with ridiculously stupid limits (read $25,000), but I’m not taking them up on it!!
    In terms of frequent flyer miles, rewards points, etc I spent 5 years flying every week for work so I’ve accrued quite a hefty miles balance, and when I do pay I wait for the Happy Hour deals and snatch them when they’re super cheap – I did this just yesterday – such a good feeling 🙂
    I also find that most of the items available on the rewards programs here aren’t things that I’m going to use, and unfortunately they don’t usually offer cashback rewards 🙁

    • Reply Joanna July 8, 2014 at 10:53 am

      Go you for knowing your limits, Rachel! If it were just me, and I didn’t have Johnny keeping me responsible, I could see myself having the same issues with credit cards. And you’re totally right…. most rewards aren’t things you actually need. That’s why we stick to airline miles, but it sounds like you’ve got that covered!! 🙂

  • Reply Racheal @ Running with Racheal June 27, 2014 at 8:21 am

    I couldn’t agree more. I do love Dave, but I had to disagree with him on this one. Giving up those airline points was hard, and like you, we have never carried credit card debt.

    Where I could improve is deducting the purchase from our budget immediately, instead of at the end of the month, when things don’t quite add up (sometimes).

    Thanks for the tips!

    • Reply Joanna July 8, 2014 at 10:54 am

      Totally. We’ve saved hundreds and hundreds from our airline credit cards, so I really don’t see how that could be a bad thing, right?!

  • Reply Little House June 27, 2014 at 10:09 am

    We also use our credit cards for all our purchases and pay them off at the end of the month – well, or close to it I’m not quite as diligent as I should be- but it’s close! (Does that count?) The only other time we use credit is if we’re given a zero interest rate and want to purchase something big – like a camera or TV. Then we pay off the balance before the promotion expires. So far, so good – it’s worked for us.

    • Reply Joanna July 8, 2014 at 10:55 am

      Good to hear about other people who work the credit card system! They’ll never get a penny of interest from us if it’s the last thing we do!

  • Reply Megyn June 27, 2014 at 10:19 am

    I had a credit card once, right after I graduated high school. I think I used it about 4 times before just cancelling it. And you know what? We were able to buy a house with ZERO credit. We literally had no credit, good or bad, to base us off of. Sure, we had to jump through a lot of hoops and get our bill payment added to our credit history to give the loan officer something to go off of, but we did it. We are in the process of purchasing another house after selling our first, still don’t have any credit cards, have a good credit score, and are able to get a good rate. Like Dave, I really don’t buy into needing a credit card, and we are proof that it can be done 🙂

    • Reply Joanna July 8, 2014 at 10:57 am

      Very cool! I love hearing about someone who has made it work without credit. For now, I think we’ll keep on with our current system, but I love knowing that it can be done!! Thanks for sharing!

  • Reply Melinda June 27, 2014 at 10:37 am

    Hey Johnnie,
    We have tried both ways–all cash, and using a credit card as you do. I am very grateful to the Dave Ramsey cash method that helped us get out of debt, but using only cash became cumbersome for us. We still use cash for certain things like restaurants, groceries and movies etc. As for debit cards, yikes! I’d rather not give a thief such direct access to our hard earned money. So for shopping, especially online, we use the credit card method you described. Both my husband and I feel the same anal impulse you do and make sure the card is paid off early so we never ever pay interest on anything. We also never use a card that has an annual fee. As for rewards, flying for “free” or “almost free” feels terrific!

    • Reply Joanna July 8, 2014 at 11:11 am

      Same here. Cash-only was pretty darn inconvenient and time consuming. If it was really the only way to keep a solid budget, we probably would have tried to stick with it. As is, we’re pretty happy with our current method. Sounds like you guys are, too! 🙂

  • Reply Retired by 40 June 27, 2014 at 11:07 am

    I agree! The rewards we have earned from using credit cards – responsibly, of course, – have helped pay for many things we couldn’t normally afford, or squeeze some extra life into our budget in especially thin months!

    • Reply Joanna July 8, 2014 at 11:13 am

      Glad to hear it! Keep on keepin’ on!

  • Reply Michelle June 27, 2014 at 11:25 am

    I’m all for using credit cards. I have never paid a penny in interest or late fees. I love them for the rewards!

    • Reply Joanna July 8, 2014 at 11:13 am

      Yup. The day we pay interest is the day we quit using credit cards!

  • Reply EcoCatLady June 27, 2014 at 12:40 pm

    I’m with you on this one, I charge everything to credit cards and have them all set to pay the full balance automatically each month. I have 3 cards, but really only use one. The other two each have one small recurring charge that goes to them each month just to keep them active.

    I know the cash only folks will be incredulous, but I know I spend MUCH less this way than I did back when I still used a combination of cash, checks and charge. Since everything is charged to one card, it’s pretty easy to look at the balance and see how my spending is for the month. And the knowledge that I’m gonna have to look at each purchase during my monthly “day of reckoning” is generally enough to keep me on track. Plus I sort of enjoy the game of watching the balance and seeing how low I can keep it. Back when I used cash it was sort of like having a pocket full of Monopoly money, and without a LOT of discipline on my part, I’d just spend it all without realizing it.

    • Reply Joanna July 8, 2014 at 11:18 am

      I’ve heard other people who feel the same way about cash… that it’s harder to stay disciplined with it. I think cash works well with the envelope system, but it can otherwise feel like free money! It sounds like you’ve found a system that works perfectly for you!

  • Reply Joshua C June 27, 2014 at 3:18 pm

    Our credit card policy is to pay off the balance every month, but also maximize all the benefits – not only on the cards we have, but other rewards cards that are offering amazing travel bonuses for meeting a minimum spend! So, sorry Dave Ramsey, we have 22 cards between the wife and me!

    But it’s due to maximizing these rewards that we will be flying to Asia this fall (Bangkok, Phuket, Hong Kong, and Bali) with all of our flight legs in business class, and all hotel stays free, all for $293 for the both of us. Yes, you read that correct, for the BOTH of us. If we had paid out of pocket for just the flights, it would have cost us $27,000!

    Not sure what your policy is on people advertising their services through your comments, but I currently have a “Side
    Hustle” in teaching people how to do this. 🙂

    Feel free to moderate this comment as needed. Haha.

    • Reply Joanna July 8, 2014 at 11:22 am

      Wow!! Talk about working the system, Joshua! That’s pretty darn amazing. I know Johnny’s been considering dipping his toes in the world of credit card churning, but I’m sure it takes a good amount of organization to do it right.

      You’ve outdone us x1000 on amazing rewards. Way to go!! Enjoy that practically free trip to Asia. Major kudos!!

  • Reply Sarah June 27, 2014 at 7:45 pm

    Such an interesting discussion! Like a previous commenter, I found that I spend WAY more when I spend just cash, which I only did for 6 months while living abroad (back when no-transaction fee credit cards weren’t as common). WIth my credit card, I know I will have a moment of reckoning as soon as I log in online. If I’ve made an expensive impulse purchase, seeing it online makes me reconsider if I really need that item (even if I can afford it). Often, I end up returning it. On the other hand, cash just flies out of my wallet and I’m left with, “I just took $100 out yesterday!” In fact, I make it a point not to carry any cash because I spend too much.

    • Reply Joanna July 8, 2014 at 2:10 pm

      I hear ya, Sarah. I have the same problem with cash. Since there’s nothing automatically tracking what I spent it on, it makes me feel a little too liberated! Never thought I’d be saying, “Thank goodness for credit cards!” but there it is! 🙂

  • Reply Rob June 27, 2014 at 8:46 pm

    Hey dude! Nice to see that you’re giving your good wife a little rest from blogging and giving us a new post! 🙂

    So, as to credit cards, I figure by now that you know that you guys and my wife and I are all on the same page in this area as well. Except perhaps for one additional consideration.

    Note that when you use a credit card the merchant must pay a small transaction charge to the credit card bank which does the behind-the-scenes processing. This cost is often built into the cost of the product or service. So sometimes – not always, mind you – when I go to pay for something with a credit card, to save a little, I might first ask the merchant how much the cost might be if I pay for it all in cash instead. Sometimes the merchant, to save having to pay the fee to the bank, will instead deduct that amount from the total cost and pass that savings on to me if I pay cash. Whereas, if not the case, then of course I will then use my credit card instead (and of course earn my credit card reward points). Just something else to keep in mind.

    • Reply Joanna July 8, 2014 at 2:17 pm

      Haha, I will say that Johnny does a lot of behind-the-scenes stuff that nobody sees.

      Ooh, very interesting! That’s a great tip to keep in mind. Thanks for sharing!

  • Reply Michael June 30, 2014 at 4:19 pm

    Agreed. The one thing I really disagree with Dave on.

    He had an interesting call the other day. He spoke with someone who said they wouldn’t rent to them without a credit score. Dave said the landlord wouldn’t have rented to him either (no credit score) even though he had enough cash to buy the entire complex.

    In a perfect world cash in the bank would be a better indicator of your financial health than the amount of debt you’re able to incur but this is not a perfect world.

    We pay our cards off every month and will continue to do so. We’ve done that for at least 15 years without fail. I do see where the temptation would be too great for some people and they would truly be better off not having the card(s) at all though.

    I do have to concede that we probably do spend more using credit than we would using cash.

    • Reply Joanna July 8, 2014 at 2:21 pm

      Yeah, it seems kind of silly that there’s so much emphasis placed on credit scores, like you said, it is what it is.

      It’s funny how everyone’s different… some feel more tempted by credit, while others feel more tempted by cash. I think what it comes down to is just keeping track of your spending in general. And if you’re paying off your cards every month, you’re doing that.

  • Reply Emily July 2, 2014 at 1:08 pm

    We use a credit card too. We always pay the balance in full. Our rewards allow my husband to have a bigger budget for our hunting/fishing/camping/dog supplies that we otherwise would have to minimize or eliminate from our spending.

    I have a credit card for my business. I pay it in full and use the rewards for business and business travel expenses, gift cards, or money applied to the balance (while not the greatest use of points it could come in handy sometime if necessary.)

    • Reply Joanna July 8, 2014 at 2:22 pm

      Sounds like you guys have a great set up! The rewards are what really tipped the scales for us in choosing to use credit cards. It’s super convenient, and we’ve saved hundreds from credit card rewards.

  • Reply Gabriela July 9, 2014 at 2:59 am

    I’m glad this blog came up on my Google search about budgets. I’m in the process of learning more about budgeting and credit because I just got my first job after graduating college. I’ve bookmarked your blog. I’m excited to see more from your happy family!

    • Reply Joanna July 9, 2014 at 5:23 pm

      Thanks, Gabriela! We were in the same boat as you just a few years ago. You can do it!

  • Reply Laura at Making Baby Provence July 16, 2014 at 12:13 pm

    We follow the exact same rules! We love all of our rewards. We opt for cash back. Yum!

    When someone starts to talk about financing a purchase or opening a new card, we simply tell them that financing is against our financial religion. Lots of funny looks with that one!

  • Reply Michael August 12, 2014 at 10:14 am

    I definitely agree with no annual fee and never carry a balance.

    I would add a rule limiting the number of cards you’ll allow yourself to have. Otherwise you’ll end up with 10 different cards, all with different “rewards” and not really using any of them enough to get the most benefit.

    IMO cards that give you cash back tend to be the best, that way you can spend the money on whatever you want (unless you’re getting a high % back toward something you would buy anyway).

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