As a financial minimalist, I share my best ways of how I use credit cards to make money or fly for free. I focus on maximizing my cash back and travel reward miles with credit cards.
I love credit cards because I can usually make anywhere between 1.5% to 9% in cash back or 1.5% to 2% in travel reward miles on everyday things I’m spending on.
Definitely check out the different credit cards that might work for you, like visit Nerdwallet or The Points Guy for some ideas.
I have 3 rules for myself in making the most of my credit cards so I’m always making more money out of credit cards than they are making from me:
- Pay Balances In Full
- Always Pay On Time
- Zero Fees Are Best
I only pay the annual membership fee for extra benefits that are worth it enough to me, even though I still don’t like how airlines stopped offering free checked baggage unless you use its airline credit card.
I generally favor no fee cards and no hassles to be able to redeem the points that come with the credit cards. Some credit cards have a minimum amount of $25 worth of points you need to accumulate before you can redeem that amount, and even then it’s only for a credit statement usually. I prefer getting straight up cash into my bank account, whether it’s only $1 or more.
The only exception to paying the balance in full is if there’s a bonus promo period of 0% APR interest rate for 12 or 15 months, so I can take my time paying the purchase off, but I still pay the entire balance within the promo period so I don’t incur any interest payments.
Why not get some of our money back in using credit cards rather than only using cash or debit cards to pay for things? Usually credit cards have incentives for us to use them, and they certainly make money on consumers, but they also charge service fees to merchants.
We don’t have to pay credit cards any more than a few of the annual fee memberships we might be willing to commit to, as long as we’re being responsible with paying off any balances.
The sky’s almost the limit for almost every kind of credit card we’d want to have, some people might prioritize getting the most amount of points for their technology spending or commuter transportation or dining out a lot.
For me, I look for cash back mostly in my groceries and sometimes dining out, or revolving categories like getting cash back in gasoline or wholesale clubs or Internet and cell phone bills. I can usually get up to 5% cash on these items, but at minimum 1.5% back.
Recently, I was surprised that one of my credit cards actually gave me 9% cash back on my grocery purchases! I’m usually only lucky if I get 5% cash back but every now and then a blind mouse finds some cheese!
With travel, I usually get miles when I’m booking a flight ticket, or staying at a hotel or dining out. One of my favorite benefits with a travel reward card is the zero foreign transaction fee on purchases.
Another benefit is when I’m using it renting a car and I can waive the collision damage since the card comes with some extra insurance in addition to my usual car insurance coverage.
You’d be surprised, but you get a lot of consumer protection benefits by using credit cards. Unlike using cash, if you get scammed in a transaction it’s hard to get your cash back. Credit cards usually protect purchases you make, like if you accidentally break the item or lose it, or it’s stolen from you or there’s a fraudulent transaction you can dispute it.
In addition, I like to think of my travel rewards card as not just a credit card, but almost as if it’s a secret savings account where I’m banking all the frequent flyer miles I’ve done and using that if I don’t feel like paying for a flight.
These reward miles can be redeemed to book a flight, and I usually like to have plenty of air miles available so I can redeem a few round trip flights out of my saved miles.
Let’s say I have 100,000 air miles, and the value of this equates to $1,500 to $2,000. If I have a domestic round trip flight worth $600, and a round trip ticket might cost 25,000 miles. I am getting a great value out of redeeming my miles here because it’s above the 1.5% to 2% monetary value at 2.4 cents per mile. This is how I can save myself money to fly for free in redeeming my miles.
If we look at other travel reward credit cards, sometimes they have amazing bonuses like Chase Sapphire with earning 100,000 points/miles, which is equivalent to $1,000, for spending $4,000 within 3 months of account opening.
It sounds nice, but you have to spend a lot of money just to earn 25% back ($1,000/$4000) or you get an extra 25% ($1,250) value when redeeming Sapphire points for travel.
You have to decide if it’s worth and if you can spend that much because I’m a financial minimalist so I have to plan carefully if I were to do this.
I try to take advantage of credit card opening bonuses as much as possible. Sometimes I close them and go for the bonus again, but you just have to check whether you can qualify for the bonus again in another 24-48 months if you read the fine print.
I usually don’t just have one credit card for each type of bill, I switch them out depending on if I’m getting more reward points or miles on the different type of expense. This is why my payment schedule isn’t automatic because I want to maximize the points and miles I can earn.
For example, I’ll switch a card out if I can get the maximum rewards out of revolving categories like: TV streaming, cell phone, internet, gas, groceries, wholesale club stores, department stores, Amazon, PayPal, restaurants, drug stores, commuter transportation, & home improvement stores.
Feel free to check out my best practices of how I use credit cards like a boss in this video.
And I strive to have the best credit score possible, so if you’d like to learn how you can boost your credit score, check out this video.
I look forward to making more investor friends! Add me on Instagram: michellemarki.
If you’re interested in learning how to take control of your finances and start becoming an investor like Warren Buffett, check out my free PDF guide.