This is how I roll, dog.
(Update: There’s now SEVEN ways to make the Credit Card Bank your Poodle. See #7).
Rule #1. Be a DeadBeat.
You’ve heard about Deadbeats… Deadbeat Dads, Occupy Wall Street Deadbeats, Welfare Deadbeats, etc. But this is a situation where being a Deadbeat is a good thing, not a bad thing.
If you pay your credit card bill on time- That is, at the end of every month or at the end of each billing cycle- Credit Card companies don’t refer to you as a responsible citizen. They call you a ‘Deadbeat’ behind your back, because you’re getting a ‘free ride’ from the Credit Card company. You’re not earning them late fees, junk fees, or interest. The supreme irony here is that the first thing any Credit issuer does when you apply for a new card or loan is check your credit score- which- among other things- largely depends on paying your bills on time.
And in case you didn’t know, there’s a good reason all credit card issuers (or at least the branch of the megabank that mails you the Credit Card and the contract) are headquartered in the state of Delaware. Delaware is unique in that it does not have the same Usury Laws as the other 50 states- Which means the bank who issues the Credit Card can ignore interest rate caps and charge you just about whatever rate they want.
So be a Deadbeat – Pay your monthly credit card bill on time and make money off your Credit Card Company, not the other way around.
Rule #2 – It Pays to ‘Churn and Burn’.
The next rule boils down to this- For the most part, Loyalty is for Suckers.
Clark Howard refers to this tactic as ‘Hopscotching’.
If I get a solicitation in the mail offering me $300 or more in cash or cash equivalent (ie it can be converted to a Visa Card or a product I am certain I will buy anyway) with no annual fee, then I SNAP UP THE DEAL. I have also been known to accept offers of $500 or more if the annual fee is less than $100. I call this a ‘Sign Up Card’.
- Fill out the offer, and Keep a copy of the initial offer/solicitation for the ‘Sign Up Card’
- When you receive the card in the mail, keep the envelope
- and write on the front the terms to earn the reward (ie Spend $1,000 in the first 3 months)
- Write the date you will have earned the rewared (ie after the$$ or months)
- Write down the date you must KILL the card or else pay an annual fee
- Set an Evernote, Google Calendar Alert, or Outlook reminder to ‘KILL MegaBank MasterCard’ at a certain date.
- Earn the reward and kill the card once you get the reward.
I went through 5+ ‘Hopscotch’ cycles with whomever kept issuing me United Airlines branded credit cards. After the 4th or 5th cycle, the agent actually got a bit snarky with me on the phone, telling me that closing out the card would reduce my credit score. I called her bluff, replying, “As soon as you stop carpet bombing me with bonus mile credit card offers I will stop applying for them”. I received another card offer from United, three weeks later.
Rule #3 – Have a ‘Utilities Only’ Credit Card.
This isn’t really pulling one over on the Bank, it’s a defensive move you must make to avoid the major hassle of having the card you use for your recurring bill payments compromised when you go on travel, eat at a chain restaurant, or shop at Target. I went through a period where my credit card kept getting compromised every 18-35 months… I got sick of calling up each and every utility company to give them the new credit card numbers, so I applied for a ‘dedicated’ card and kept it in its original envelope.
How it works. Pick a no-annual-fee rewards card and NEVER take it out of the envelope. Keep it in a file cabinet or secure location and use it to pay your monthly cell phone, electricity, cable, internet, garbage removal, water, utility, etc bills. This tactic has worked well for me, and I have yet to have this ‘bill pay’ card compromised like a ‘wallet’ card. Cash-back rewards cards that automatically deposit the cash back reward in your account are great choices. Schwab, Fidelity, and credit unions have great choices here.
Rule #4 – Have 3 or more cards at all times.
A corollary to rule #3 is that you should have 2 cards available for wallet use at all times . There are 2 types of credit cards in your wallet- Cards that have been compromised, and cards that will be compromised. And Murphy’s Law of credit cards dictates that your card will be compromised at the worst possible time. I recently had my favorite credit card compromised 1 day before going on vacation, but fortunately I had a ‘Sign Up’ card still active that I promoted temporarily to ‘wallet’ use. I did not have to break the envelope seal on my ‘Utilities Only’ credit card as I waited for a new card to arrive in the mail.
Another reason to have more than 2 cards active is that the snarky United Credit Card rep mentioned in Rule #2 was technically correct- Note that your credit does takes a minor ding when you close out an account. IF you go from only 2 available cards down to to 1 card your ‘Utilization’ (the amount of available credit in use) goes up, which is a minor hit on your credit score.
Keeping multiple cards available- and in use- makes it easier to cut up a promotional card and apply for a new one when you get a lucrative sign-up bonus offer.
Rule #5 – Know the benefits (fine print) on your card.
Ignoring these is like giving the card issuer free money. Examples:
- Amex commonly extends manufacturers warranties by up to 3 years beyond the manufacturer’s warranty.
- Rental car insurance – In most cases, if there is an accident on your rental car, the card company pays the deductible on your normal insurance policy.
- Price protection – In many cases, MasterCard provides price protection for up to 90 days if the price drops on a recent purchase.
Rule #6 – Don’t pay a credit agency for a credit report, which is free.
There are advertisements for credit reporting sites that are ‘Free’, but they are not. The only truly ‘Free’ Credit Report is at Annualcreditreport.com, where you get 1 report per agency- 3 Total Reports per year- for Free.
Rule #7 – Why Wouldn’t you want a new credit card every 3 months?
(Update October 2014) As a corollary to Rule #2, in light of the recent credit card breaches from Target, Home Depot, KMart, JP Morgan Chase (and insert next credit card breach name here), why would you NOT want a new credit card every few months? Signing up for new card bonus offers (and then tossing the cards away like a dirty rag after you’ve earned the sign-up bonus) makes you a ‘moving target’ to credit fraudsters. Credit Card thieves won’t be able to keep up with your moves!
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