Rolling In The Points

How to use credit cards to fund your portfolio.

Author

Cade Invests
June 21, 2022

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Quote

"Procrastination is like a credit card: it's a lot of fun until you get the bill." - Christopher Parker

Credit Cards For The Win

Let me start by saying I am relatively new to the whole "credit card rewards" program. The card I am going to be talking about is only my second card. There is a lot of skepticism around credit cards, and for good reason, but some offer pretty sweet rewards.

First things first, for those of you who don't have a credit score here's how you can get started safely. Feel free to skip this section if you do.

No credit, no problem? Look into picking up a secured credit card (this is what I did). With a secured card you will send the credit card company an initial cash deposit for a credit limit of that amount.

After you show that you are a responsible person and don't max your card out on Starbucks every month, they will give you back your initial deposit and let you continue using the card.

Once you have used this card for 3-6 months, you can leverage your score to apply for cards that offer better rewards and benefits.

PS. Don't go happy applying for cards as each one you get rejected on counts as a "hard inquiry" and damages your credit score.

How You Score Points

The basis of credit card points is that for every dollar spent, you earn a certain percent back in points. These points can then be redeemed for cash back (that I reinvested), airline tickets, hotels, gift cards, car rentals, and who knows what else.

Each card is unique and will offer a different amount of points back for spending in certain categories. For example, some cards offer 1.5% back on everything, while others will pay 3% back on restaurants and 2% back on online purchases.

The baseline for rewards is 1 point = $0.01. That means every 1,000 points is equal to $10.

Rewards are different for each card, which is why it's important to get one whose benefits suit you best.

The Bonus

Companies will offer bonuses in the form of points to lure you in.

Little do they know, you are an expert with credit cards and are about to enjoy every benefit, without paying them a penny.

These bonuses typically work by rewarding points when you spend a predetermined amount in a certain time window after signing up. The card which I have been using, the Chase Freedom Flex, offers $200 back (20,000 points) when you spend $500 on purchases in your first 3 months.

Here's the secret with credit cards. Only use them to buy things you were going to buy anyways. For me, I was going to spend $500 on gas either way, so why not get rewarded for it?

If you are a big spender, these rewards can be much more than $200 as shown below.

Watch Out For...

Not all cards are created equal. Some will have great offers but also charge you an annual fee.

This is when it comes even more important to make sure you can benefit from the card's rewards, or else you are wasting money. (My cards all have a $0 annual fee)

Also, make sure to set up auto payments and PAY YOUR CARD OFF EVERY MONTH. Missing payments is the fastest way to ruin your credit score and that 25%+ interest rate will compound against you quickly.

What I Use

As mentioned I am using the Chase Freedom Flex card. Overall, I have been very pleased with it, and enjoy its unique rewards structure.

  • 5% back on rotating categories: Gas stations, grocery stores, and online merchants like Amazon. (Right now they are offering 5% cash back on combined gas station and grocery store purchases in the first year.)

  • 5% back on travel: Has to be purchased through Chase Ultimate Rewards.

  • 3% back on dining: All restaurants and select delivery services.

  • 3% back at drugstores.

  • 1% back everything else.

Given that I mostly use my card for gas, groceries, restaurants, and some online shopping I found the Chase Freedom Flex to be a solid choice for me.

If you want a piece of these rewards, or want to claim the $200 cash back offer, you can apply for the card here.

Conclusion

When used correctly, credit cards can be an effective way to earn cash back on purchases you were going to make anyways. Which is extra money you can use to invest (;

When used incorrectly, they can wreak havoc on one's finances.

If you are going to get into the world of credit card rewards be sure to always pay it off and never hold a balance on it. I'll be sure to send out any updates on cards I pick up in the future!

Till next time, Cade

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Nothing in this email is intended to serve as financial advice. Do your own research. Thanks for reading, if you have any questions, comments, suggestions, etc. about the email send me a DM on twitter. See you soon!