Credit Cards

Recently, an Air Force Academy cadet contacted me regarding credit cards. She was curious about which credit cards I use and if she should have a credit card. I will never advise anyone get a credit card without knowing a lot about their financial maturity. Credit cards are far too destructive in the wrong hands. If you carry a balance from month to month you need to cut up all of your credit cards (immediately…stop reading this and go cut up your cards) until you learn to use your plastic wisely. Credit cards are like fire, if you cannot control them, they will ruin you.

One thing everyone needs to realize is that credit cards are not status symbols, free money, scary, or bad to have; they are just pieces of plastic. When using credit cards, they are not for emergencies, a checking account buffer, free magic money, or making purchases you cannot actually afford. Credit cards are extensions of the money you already have and spending more than is currently in your checking/saving’s account is sending you careening off the cliff into high interest debt. Use a credit card the same way you use your debit card. Emergency fund accounts are for emergencies, checking/savings accounts are used to buffer your everyday checking account, magic money is from your parents does not exist. When you view your credit cards maturely, you will remain in control. My wife gets after me for having more than a few credit cards. The truth is, it does not matter if you have 1 or 100 credit cards when used properly, an unused credit card is completely benign.

In college, I used a credit card to finance my life and encourage my stupid. I bought a new sound system (which I couldn’t afford). I purchased video games and gaming systems (which I also could not afford). I built a new, top of the line, computer (which I definitely could not afford). I used credit cards to augment my income, spending much more than I had and more than I would have at the end of the month. I was stupid. I use my own life as an example in the hope that you will not follow in my footsteps. I will not blindly recommend someone get a credit card because I do not know who can and cannot handle the responsibility. Carrying a balance at the end of the month is foolish and the added interest is a waste of your money. If you cannot use a credit card wisely, you should cut up all of your credit cards and cancel all of your accounts immediately. Many of my credit card purchases were luxury items and you may think that carrying a balance at the end of the month is ok because you only use your credit card to purchase food or housing for your family. That is not an excuse for financing life with high interest credit. You need to do a better job of budgeting, build up a healthy emergency fund for those unexpected purchases, and cut your lifestyle down.

I have a few friends who claim that they cannot live without a credit card because they worry about emergencies and stress about having to make purchases that they cannot afford otherwise. The simple answer to that is, if you cannot afford something, then do not buy it. If you cannot purchase something in cash today, putting it on a credit card at 15% interest is not going to make your life better! I advise all of my friends to build up an emergency fund of 3+ months worth of expenses in order to cover emergencies. Using a credit card in an emergency, because you cannot afford something, only increases the severity of the emergency.

Now, assuming that everyone who should not have a credit card has abandoned this post to cut up their cards, let’s get into what every military member needs to know about credit cards and which credit cards I suggest.

Servicemember Civil Relief Act (SCRA) & Military Lending Act (MLA)

Step 1 is to learn about SCRA and MLA benefits for all active duty military members. Read this article to learn about the benefits: CHAPTER 50—SERVICEMEMBERS CIVIL RELIEF and Military Lending Act. Assuming that you clicked the links, let out a very loud snort, and said ‘Nope, not reading that!’ I will summarize it for you:

  • Credit card interest and credit card debt rates incurred prior to and during active duty service are capped at 6%

That is a very nice feature but does not actually affect you (because you pay off your credit card EVERY MONTH). The real benefits lie outside the law. Quite a few major credit card companies will expand the benefits to include:

  • Waived yearly fees
  • Refunded interest and fees incurred during deployment
  • Interest rates lower than 6%

Companies offer different benefits, but the above benefits are some of the most common. The real benefits come from finding the right card(s) for you.

Credit Cards

The categories I use for credit cards correspond to where I spend the most (Everyday Use, Grocery, Gas, and Travel) during an average month. It is difficult to compare different credit cards because they do not offer the same incentives/rewards, many cards offer cash back, others offer rewards points, and others are only useful for passive benefits. I evaluate the cards based on how much cash money each card puts back in my wallet, converting points to cash value requires a conversion from points to cash. I use the site RewardStock and the app Walla.by to help convert points to cash value.

Check out this quick cheat sheet if you want a quick reference guide to what is outlined below.

*Notice: I’ve added some referral links under each card. These referral links provide me with some additional points if you apply for the card. Do not feel obligated or pressured in any way to click on those links to the card.

Everyday Use:

This card is the card that I use for everyday purchases. The main thing to look for in an everyday use card is a high percentage of cash back on all purchases without limitations. If you are lazy (another word I am using for not wanting to fuss with 6 different cards) and only want to use one credit card, this is going to be the only card you need in your wallet. My wife does not like the fact that I walk around with multiple credit cards and will not carry more than one. The card in described in this category is the only card she carries.

Limitles Cashback Rewards Visa Signature

Limitless™ Cashback Rewards Visa Signature® Card

Issuer: USAA
Annual Fee: $0
Card: Visa

Pros:
• 2.5% back on all purchases

Cons:
• This is a limited time offer
• You must bank with USAA
• USAA requires a direct deposit of $1000+

In my opinion, this is the absolute best card on the market. My wife does not like the fact that I walk around with multiple credit cards and will not carry more than one. This is the only card she carries. The only reason I carry more cards than this is that I enjoy the challenge of trying to maximize my rewards.

Sadly, it looks like the USAA Limitless Cashback card is no longer offered.

Citi® Double Cash Card

Issuer: CitiCitiDoubleCash
Annual Fee: $0
Card: Mastercard

Pros:
• Earn 2% cash back on purchases by earning 1% when you buy plus 1% as you pay

Cons:
• No real cons…maybe that it is only 2% or that you have to wait for that second 1%

Great card for anyone who wants to have a single card that they do not have to think about in order to max out their return. If you are only going to have one card, this is it.

OR

Chase Freedom (My referral link)

Chase Freedom

Issuer: Chase
Annual Fee: $0
Card: Visa

Pros:
• 1% Cash back on all purchases
• 5% Cash back on purchases made in rotating categories

Cons:
• To get the 5% cash back offer you must sign up each quarter
• You must keep track of the rotating categories each quarter
• If you do not opt into the quarterly categories you will not get the match

Earn 5% cash back in rotating categories each quarter, like gas stations, internet services, android/apple pay, ect, up to the quarterly maximum each time you activate the promotion. In addition, unlimited 1% cash back on all other purchases. I truly hate the fact that Chase makes you activate the categories each quarter, meaning that if you do not go to the Chase website and ‘activate’ the categories you do not get the 5% cash back. Other than that large gripe, I use this card more than the Discover It card because the categories are more applicable, this quarter, to my life.

OR

Discover it Card

Discover it Card

Issuer: Discover
Annual Fee: $0
Card: Discover

Pros:
• 1% Cash back on all purchases
• 5% Cash back on purchases made in rotating categories

Cons:
• To get the 5% cash back offer you must sign up each quarter
• You must keep track of the rotating categories each quarter

Earn 5% cash back in rotating categories each quarter like gas stations, restaurants, Amazon.com, wholesale clubs, ect., up to the quarterly maximum each time you activate. In addition, unlimited 1% cash back on all other purchases. I suggest this card if you are willing to keep track of those categories.

Both of the cards listed above are essentially the same card issued by different companies.

OR

Fidelity Rewards Visa Signature Card

A Fidelity Investments' American Express card

Issuer: Fidelity
Annual Fee: $0
Card: American Express

Pros:
• 2% Cash back on all purchases

Cons:
• Rewards points are only redeemable in the following Fidelity investment accounts:

  • Brokerage account
  • Fidelity Cash Management Account
  • Fidelity-managed 529 College Savings plan
  • Retirement account
  • Fidelity Go account
  • Fidelity Charitable Giving Account

This is my favorite everyday use card. Prior to doing any research on how to use credit cards this was the only card I carried. My only problem with this card is the fact that you can only get rewards if you have a Fidelity investment account.

Gas Card:

This card category provides the highest percentage of cash back (or rewards points) on any purchase made at a gas station. Everyone has to fill up with gas so it makes sense to try to maximize your cash back/rewards every time you do. The highest cashback value I have found for gas is 5%. If your card, such as the Discover or chase Freedom, offers 5% cash back you are a winner. However, those cards only offer 5% cashback for a single quarter during the year. One small bonus, the Discover It card offers 10% cashback for the first year the card is activated.

Cashback Rewards Plus American ExpressCashback Rewards Plus American Express® Card

Issuer: USAA
Annual Fee: $0
Card: American Express

Pros:
• Earn 5% on Gas (up to $3,000 per year)
• Earn 5% cash back on all purchases made on a military base

Cons:
• You need to be a member of USAA
• It only 1% cash back on anything other than gas

This category is not the most important to me because I only fill up once every two weeks averaging about $25 per fill-up. Which means that my yearly bonus is about $32 if I get 5% cashback. When compared agains the 2.5% cash back I get with the everyday use card it is only a $16 yearly net bonus. Not much, but I do use it to make some additional purchases on base, which helps boost the reward dollars.

Runners up:

Blue Cash Preferred® Card from American Express

American Express Blue Cash Preferred card offers 3% cashback year round at gas stations. It does come with a 95$ annual fee (waived for military) which does decrease the rewards benefit slightly. If you cannot get fees waived you must spend over $3,000 on gas to get any benefit from the card. (My wife and I spent around $2,000 on gas in 2017)

Grocery Card:

This card is meant to provide the highest percentage of cash back (or rewards points) on any purchases made at grocery stores/supermarkets. My wife and I have a pretty large grocery budget each year so I use this category to maximize our rewards.

Blue Cash Preferred Card from American Express (My referral link)Blue Cash Preferred® Card from American Express

Issuer/Card: American Express
Annual Fee: $95 ($0 for active duty military because of SCRA benefits)

Pros:
• 6% back on groceries (up to $6,000 a year in spending)

Cons:
• $95 annual fee that is waived for active duty military
You need to claim your SCRA benefits from American Express!!!

My wife and I budget about $100 a week which is about $5,200 a year on groceries. I will bump that up to $6,500 because we are not perfect with our budget. With minimal effort, we are able to receive about $390 a year in cash back from all of our grocery purchases, not bad for not really doing anything.

Travel Card:

The main things I look for in a travel card are whether the company waives yearly fees (which can be substantial for military), what the current sign-on bonus is, and what other rewards, passive and active, are offered.

The rewards offered by many travel cards, though considerable, are often not as rewarding for everyday purchases. Go read about this idiot who used his travel card to buy a $45,000 car. His first poor decision was the fact that he could not pay off his credit card immediately after the purchase, the second was the fact that he did not maximize his benefits, the third was the how much he overpaid for such a small gain. When you convert his points to percent cash back, he only got about 1.5% cash back…pretty poor performance when you can get 2-2.5% cash back using other cards.

Time to dive into travel cards, which are some of my favorite cards because my wife and I do travel fairly often.

American Express Platinum (My referral link)

AMEX Platinum.PNG

Issuer/Card: American Express
Annual Fee: $550 ($0 for active duty military because of SCRA)

Pros:
1. Large sign-on bonus
2. Hilton Honor gold status
3. No foreign transaction fees
4. Free Boingo wifi
5. Car rental benefits with Avis, Hertz, and National Car Rental
6. Car rental loss & damage insurance
7. Premium roadside assistance
8. $200 travel expenses reimbursed per year
9. 15$ worth of Uber rides per month ($35 in December)
10. Etc…

Cons:
• This card really should not be used for everyday purchases
• You need to claim the SCRA benefits in order to make sure you do not get charged annually
• You lose the waived yearly fee benefit once you leave the military so be cognizant of the rules
• You need to claim your SCRA benefits!!!

I use this card when traveling: for plane ticket purchases, or if the card has an additional benefit for a purchase. I really enjoy this card for the passive benefits it offers, HH Gold Status, free Uber rides, etc. but I would not have this card if I had to pay the annual fee. The day I leave the military is the day that this card gets cancelled. If you travel enough, it may offer enough reward to offset the cost.

An extra bonus for military: the American Express platinum card actually comes in multiple flavors. Currently I have the AMEX PlatinumBusiness Platinum Card , AMEX Ameriprise, and AMEX Charles Schwab (requires a brokerage account). There are also cards for account holders with Morgan Stanley and Goldman Sachs. You can get the Morgan Stanley with an access investing account ($5,000 minimum investment). The nice thing about the extra cards is the fact that you can use the Uber credits (business card does not get Uber credits) and travel credits valued at, $1,800 value per year with 5 AMEX cards, each year.

OR

Chase Sapphire Reserve (My referral link)

Issuer: Chase Chase Saphire Reserve
Annual Fee: $450 ($0 for active duty military because of SCRA)
Card: Visa

Pros:
1. Large sign-on bonus
2. Car rental benefits
3. Car rental loss & damage insurance
4. Premium roadside assistance
5. Restaurant’s give a little over 4% back when the points are used for travel
6. $300 travel expenses reimbursed per year

Cons:
• This card really should not be used for everyday purchases
• You need to claim the SCRA benefits in order to make sure you do not get charged annually
• You lose the waived yearly fee benefit once you leave the military so be cognizant of the rules
• You need to claim your SCRA benefits!!!

I use this card when traveling: for car rentals, or if the card has an additional benefit for a purchase. I really enjoy this card for the passive benefits it offers but I would not have this card if I had to pay the annual fee. The day I leave the military is the day that this card gets cancelled. If you travel enough, it may offer enough reward to offset the cost. The best part about this card is the fact that the travel credit is usable on a variety of travel. I’ve used it for Uber, plane rides, train tickets, and hotel stays.

Each card listed here is the top performer in its category and a card that I own/use on a regular basis. I want to emphasize that I am very careful with my cards and monitor my accounts closely. If you cannot handle the responsibility, you are better off without a credit card. Nobody, and I truly mean nobody, needs a credit card. If you cannot handle a credit card, you are better off learning to budget, building an emergency fund, and staying away from high interest loans altogether.

Additional Cards

Below is a list of additional cards that I have, mainly for the passive rewards offered, and use either occasionally or regularly. The following cards are in no particular order but I do recommend them for the reasons I’ll discuss below.

Uber Visa CardUber Credit Card

Originally, I got this card in order to get the $100 sign on bonus but it offers 4% cashback for restaurant/UberEATS purchases. If you do not have a Chase Sapphire Reserve card, this is the best option for restaurant purchases. (not sure why I do not get that 4% gack with uber rides…)

Hilton Honors Aspire Card (My referral link)Amex-Hilton-Ascend

I love this card for the many passive benefits it offers with Hilton. The offers include diamond status, one free night a year, various property credits >$300, $250 airline credit per year, and other various perks. I use this card for all Hilton purchases. Additionally, there is a $450 fee that is waived for military (Claim your SCRA!).

Amazon.com Rewards Visa CardAmazon Rewards

If you make many purchases at a certain store it might be beneficial to get a card that offers a higher percent cash back for that specific store. I do not even carry this card around but I keep it for purchases that I make at Amazon.com. This card offers 3% cash back at Amazon and if you have a prime membership it offers 5% cash back.

American Express Delta Reserve (My referral link)delta-reserve

I use this card for the passive benefits, companion pass, and the sign on bonus. The companion pass essentially allows a buy one get one round trip ticket. The card also allows for priority boarding and a few other small perks. Additionally, there is a $450 fee that is waived for military (Claim your SCRA!)


Below is my actual, month-to-month credit card spending for 2017. You can see each month, Jan-Dec, as spending increases throughout the month. You will notice that, at the end of each month, I pay off all cards in full.

Credit Card Graph

Image from Personal Capital

Usually, I pay off the cards on the last day of the month and rent is charged on the first, making the graph not actually return to $0. You’ll have to trust me that this is just part of how the data for the graph is reconciled. I truly do pay off every card in full each month.

In this year alone, I have received over $1,500 in credit card rewards. Some of the awards have been in the form of cash back, some as travel reimbursements, and others (not shown below) are rewards to purchase plane tickets, Amazon.com items, uber credits, etc. See below for another screenshot:

2017 Card Rewards

As stated above, this chart does not show rewards used to purchase travel tickets, cars, or Amazon.com, etc purchases. Only reimbursements and cash back from the various cards. $1,000 is not much, but every little bit helps. The incremental approach.


If you have any questions or need any help walking through any of the processes mentioned in this post, especially claiming SCRA/MLA benefits, do not hesitate to contact me at IncrementalMillennial@gmail.com

Follow on Twitter @IncMillennial


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