How To Leverage Credit Cards

What I’m about to share with you is something no bank will advise or admit. Don’t get trapped paying them interest and depending on them to survive with your financial life! They LOVE when you revolve your credit balances because they are betting that you will. For the majority of banks, this is their main source of revenue and their business model! If you created your budget and are living below your means, there is no reason why you should be adding credit debt to your life and pay interest and bank fees!

However, don’t dismiss credit cards! Credit cards bring great value to your short term cash flow because you get to hold on to your cash longer by taking advantage of the float they provide (between 30-60 days). Also, can we admit that the rewards/cashback programs are just simply amazing! Therefore, don’t get a credit card to revolve balances because that means you can’t afford what you are about to purchase!

Here are the best practices and the most effective ways to leverage a credit card product:

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Improving your cash flow is a huge value proposition that credit cards offer because you have a 30 day billing cycle and a 30 day payment cycle. In other words, you have 30 days to use the card to pay for your expenses. Once that cycle is over, a credit card statement is produced and you have to pay it off in full within 30 days. Notice how I said “pay it off in full” and not make the minimum payment! If you’ve established your budget and you are living below your means, then why are you about to make minimum payments and pay interest? If you are paying interest, you need to stop and adjust your strategy!

stopStop paying interest on credit cards and personal lines of credit! You want to avoid paying interest to the banks at all costs. Change your mind set and your perception of a credit line and credit card. See them as an opportunity to extend your cash flow and to receive rewards! Don’t use your credit cards to make huge purchases and to live above your means. It makes no sense – you’re giving your hard earned money away to the banks. Were those pair of shoes or was that new suite worth it? Are you willing to pay interest on it and then experience buyer’s remorse because you know you can’t afford it? STOP and think about your budget and financial goals before making the wrong purchase.

PAY IN FULL. EVERY MONTH. 

If you are leveraging your lines of credit and credit cards, make sure to pay them off in full every month! You want to avoid paying interest because this will destroy your budget and your financial goals. If you hold your self accountable to your budget and stick to the financial plan you have created, you will only use the credit cards for the purchases you have already planned to have. Not the spontaneous purchases that will cripple your savings and ruin your chances of finally purchasing your new home or car!

At the end of it all, this will require you to change your mind set and perception of the credit card.

Here is what you need to remember…leverage the credit card for the following reasons:

  • Improve your cash flow by extending it for an additional 30-60 days
  • Enjoy the benefits from points/miles/cash back and use it to make money from your expenses

Since we have talked about the value credit cards can provide and how you should effectively leverage it, I will soon post about the differences between a charge card versus a credit card.

 

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11 thoughts on “How To Leverage Credit Cards

    1. Christian, I appreciate the feedback! As long as you don’t abuse your credit card you will be in great shape. Think of it as a tool in your tool box to support your goals, not to bring you down by paying interest and falling behind. Feel free to message me any time!

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