Using Credit Cards as Nature Intended #629

of people this is a polarizing topic. That's kind of when we started to think about this episode, we were like, man, there's there's comments from people right and left in the personal finance space, some either deify credit card usage or in some demonize it. And you and I were, of course in that shades of gray area, and we want to talk about how to use them the right way because when you do, then you're gonna gain benefits and

if you use them improperly, you're screwing yourself. Yeah, and especially with a topic that does kind of fall in that middle ground, it is important for us to come back and to revisit a topic like this. Right, it's not like a like talking about investing that is really important, and we're planning to do that soon as well. But when you have a topic like this that could go either way, it's probably worth us revisiting these types of

topics we're eating more often than not. In an attempt to be fair, we're even in a steel man the arguments from the other side. So we're gonna kind of try to take a balanced approach and say, hey, here's where caredit cards fall short as a strategy, here's where they might make sense, and then you get to decide well you think is best based on all the information

we're gonna try to present here. But before we get to that, man, I wanted to mention that when you're trying to get someone to make a behavior change, I've always thought this, but I've never been great at implementing it, But carrots are better than sticks, right, So, and what

I mean by that depends on how your talking to. Well, we think there's literally a conversation Kit and I had last night about one of our kids, because trying to figure out what is actually gonna work best for this particular child given this particular situation, we've tried both neither work, Okay, So in this case, sometimes you just have to, um, you know, give them up for an option. That's one.

That's one choice, let's try. But depending on the situation, I would say a lot of times a carrot makes more sense. And our illustrious power company here where we live, Matt, they actually kind of took this to heart and they offer a discount for paying early instead of a penalty for paying late. And I think that's great, and it makes me want to pay my bill early because I

want to pay the least amount possible. But you don't know, I think it is going to incentivize a lot of people to approach their power bill the right way, get energized about paying it instead of feeling like an idiot if they don't pay it on time. Energized and pay

your power. Yeah. Well, and it makes me think too, as a mom and pop landlord, this is the kind of thing I'm trying to implement in in my leases moving forward with with tenants is to say, hey, instead of a late fee for being five days ten late days late on your on your rent, how about a positive incentive to pay your rent on time. And maybe that reframed it for somebody and makes them more likely

to do that. Yeah, that's true. It just depends on the individual, right, because I see a paying quote unquote early as just paying on time, like like the way I press things. I'm like, oh, yeah, well that's the price that you're going to charge me because I pay my bill what I'm supposed to as as opposed to being penalized when I'm late, you know. And so you've

got an iron trap up there. A lot of people though they're they're easily minis set up to auto pay, and so I guess what they're Maybe what the power company is trying to do is just incentivized folks to get enrolled so that it's not something that you have to worry about. Therefore we have to spend less time on collections and hounding folks. But yeah, I've not thought about doing that with properties, but that could be a

very very cool way. Maybe if you have a like what if you pay before the first like something like that, Like if you can pay and have three different prices because it's already third first or it's getting complicated, February will pay the day before it's do if you pay the day before it's do you get a fifty dollar Yeah?

Like I mean, my guess is that if you implemented that tomorrow, more of your tenants would pay before it's due, as opposed to like taking that great speriod up until you know, the last day possible, even if you went ahead and charged, if you went ahead and raise the standard rent by fifty bucks, the psychology, what you're saying is the psychological component would kick in and cause people to pay early. I think so. Yeah, I think so.

I was glad to see this. I think that's one of those things where we we don't give as much credence as we could to Psychology is and there's ways to motivate people, I think, to do the right thing without like making them feel like idiots for you know, for being a little late. Instead, let's let's incentivize them, let's give a positive encouragement to do the right thing earlier.

All right. The beer that you and I are going to enjoy during this episode is called the Judge and this is a chocolate vanilla porter from Memphis made Bruined Company. Looking forward to enjoying us one and we will share our thoughts at the end of the episode, for sure. All right, But let's get onto the subject at Handmatt,

we're talking about using credit cards as nature intended. And if you've been listening for any length of time, Matt, you just mentioned that the craft beer we're drinking on this episode, of course, any how do money listener knows Matt and Joel like beer, right, and not just crap beer, but good beer. Right, And we're drinking this one here, looking forward to talking about at the end of the episode. But crap beer. I don't know. Maybe you said not

crap beer, you said good beer. Yeah, okay, not crap beer, craft beer. Crap beer sounds a lot like craft beer. Yeah, there's a several different thing. But I think interestingly enough, we're talking about how credit cards can be polarizing, well, booze can also be a polarizing subject. We've had emails from folks who say they'd like to listen to the show, but they just can't do it because of our stance

on alcohol. We've heard from other folks who attend their local religious congregation and they tell us, hey, we'd happily tell everyone we know about you guys, but you got to kick the beer thing to the curb, and at least in some circles, kind of like the one I grow up in. Beer can be a polarizing thing. But I want to say two things. One we I don't fault those folks. If our affinity for beer isn't your cup of tea, that's okay. We were not going to

force you to listen. We can't force you to listen. But it's also important to mention that we can't please everyone. You know, we might not say it enough, but we practice moderation. Matt and I do. We we don't drink very much. We limit our intake and that's a really important thing to us. But yeah, there are other things that can be just as polarizing. Light credit cards. Everyone's got a hot take out there. They're either the greatest

thing since sliced bread or they'll ruin you overnight. But reality, it's a bit more nuanced, and that's what we want to discuss today. Nuanced or being logical, balanced approach. These are not prize attributes in our society today. They specially when it comes to mass media. A hefty TikTok following yeah, hot takes and off the cuff remarks does end up getting all the press. There is often little room for those shades agree that we talked about in the world

that we live in. On that note, billionaire businessman Mark Cuban he uh, he recently said that if you use credit cards, you don't want to be rich. Obviously, great hot take for all the writers over there at CNBC. I love that kind of stuff. Start writing this article now. He makes it sound like credit cards are the devil with those remarks, kind of like Bobby Boucher uh foodsball territory.

But of course they are not. Uh. In fact, there are a lot of how the money listeners out there who are on their wealth building journey while simultaneously using credit cards. We most definitely fallen into that camp as well, where we are with you on that. So today we are going to discuss the pros and the cons of credit cards, and then we're gonna talk about how to use credit cards most effectively, how does that you can

optimize that use. We're gonna discuss all of that today, all right, So let's let's do it because and let's first give some credence maybe to Mark Cuban, because he is right at least in part uh. And and let's go through some of the biggest reasons to not use credit cards. Some of the main reasons at the people who say that they are the devil, why did they say that. Well, we're gonna get into that in just

a second. But I think human is right when he says credit cards aren't going to make you rich, that's true. Agree with him on that and say that he said that they're going to keep you from getting rich. Well, yeah,

that's a good point. But like if he's talking about like that they won't make you rich, I think that, you know, I could get behind that, Like nobody's gonna sign up for all the credit cards in the world and be like, that's how I didn't look at all the secret to my success bonus points and rewards, that's how I funded retirement. No, it's gonna take a whole

lot more than that. Right, if we were to talk about wealth Matt for building wealth for like three hours, it's unlikely the credit card usage would even come up in that conversation. There are so many more levers that you need to pull. Credit cards are a peripheral way to boost your finances, right There not some magic secret sauce to building wealth. That's that's for sure. And uh, it's still that doesn't mean that they can't play a

role in your personal finances. But before you know, we talk about the property what we like about credit cards, let's just pay some service and talk about the biggest cons to using them and some of the reasons that people should consider avoiding credit cards altogether. Of course, yeah, I mean you said earlier that we're gonna steal man. That being said, we are always careful and we always want to make sure that folks are using credit cards the right way, because if you do not use this

financial tool properly, it really could shipwreck your finances. Right, if you can't pay the bill on time and in full, it's going to cost you big money every single month because interest rates they're going up, and so that means that your lack of disciplined use, your your lack of discipline spending is going to cost you even more money.

And this is of course the biggest potential downfall of using credit cards, and even a few months of poor credit card usage can dig you a hole so deep that it will often take you years then to climb out of it. And so while this is a major con and certainly is a reason for caution, like this alone doesn't lead us to think that credit cards should

be off limits. I mean we're talking about how a credit card is a tool, right, Like it makes me think about just using like a knife in the kitchen, and just because it could potentially cause you harm, does that mean that that is now a tool that you completely avoid for the rest of your life. No, absolutely not. You instead learn how to properly hold a knife. You learn how to dice vegetables or in your case, trim fat off of a brisk ul um. Yeah, eventually I

was like, that does not compute. I don't need vegetables. You learnable occasionally, but you learn how to take care of a knife, how to keep it sharp, because all of these things are just the proper way of using that tool. Like to say, it's such a infantalizing view to say that, oh, this could cause you harm, therefore you shouldn't ever be allowed to use it. That is not the approach that we take when it comes to things like credit cards or other tools in our life.

You're right and fantializing it. We're treating adults like children. And it's and it's not that there aren't risks here when we use credit cards. That's what we're talking about now. The first one you just mentioned improper use. If you use a credit card improperly in your racking up debt because you can't control your spending, that's one reason to

consider not using them at all. Another another reason that a lot of people point to, and I think they make a good point, is that it can lead to overspending, right because even if you can and do use the tool properly, there are other potential downsize to using plastic for everything. And some folks they spend more using a credit card because it doesn't feel like real money to them. Swiping it's just so easy, and Gus, we're not really

swiping anymore. We're more like inserting or tapping, which I did. I love tapping. Tapping is the great It's the greatest. It's so much, so much better. Like I hate inserting the well, the inserts. It felt like a step backwards, right, like like we've been swiping for years and then they switched to the insert and then on top of that it's got that like sound effect, which but just being able to set it on top of like the little square device for like a split second. I love it.

It's nice, right and it's but it just doesn't trigger the same psychological response that happens when we fork over actual greenbacks we need. That's what they say. Yeah, when you have to reach into your wallet and we have to pull out cash, it's like there's some sort of like meant whole pain that comes along with it that's actually good for us. Is what the study is, literally giving something over. But there's also there's been there's other

studies that say the opposite. Yeah, that as well well, And there's also I think part of it is generational and it's changing exactly. And I think we've heard from a lot of our younger listeners who say, actually, it's more painful for me to use my credit card. Cash feels like the free money. So I think depending on how you are raised, what era you were born in, that it might not ring true in the same way.

But I think it isn't important to mention some people, probably good chunk of people are more likely to overspend because maybe they get excited about earning the rewards, or they just or it doesn't make them feel the pain of spending money in the same way when they're using plastic, when they're using a credit card and so yeah, I think that is a potential problem that credit card users

run up against. Yeah, they're they're they're definitely seems like I mean, if you were only using cash, I would totally agree with the fact that it's going to seem like there's more of a finite amount of resources, right, because that's the thing with credit card the envelope method. You can't overspend exactly. Yeah, when you've got a credit card, or even a debit card for that matter, I mean, you're not really thinking about how much do I have

left in this particular category. When it comes to groceries or you know, eating out, it does feel a bit more limitless, which which I totally get. Yeah, And so even if you are not using it improperly in a way, like even if you are disciplined about paying that credit card built off on time and in full each month, you still might end up spending more than you'd like to. And that is a problem, right, because you're trying to accomplish all sorts of money goals, and if you're spending

too much because it's easy, that's a problem. And I think one thing that could remedy this mat There was a study I saw about printing credit card balances on receipts every time we purchased something that would be helpful. I think then all of a sudden, it wouldn't feel limit less because you're like, oh, that's how much I have left, okay, yeah, Or that's how much I've spent this month, that's what the balance is at. Those kind of reminders I think would trigger something in us that

would be helpful. So, yeah, limits can be helpful, when balances can be helpful. That's going to happen in time soon. But I kind of wish it would because I think that would at least help on this front. Yeah, But going back to maybe what some more younger listeners are experiencing, I'm I totally agree. I am because the majority of my finances are digital. Anytime I have cash on hand, it does not feel like real money because I don't

have a way for accounting for that money. It's not incorporated into my overall finances, and so it really does just feel like I could spend it on whatever the heck I want to spend it on. It feels like blow money. Uh, And so I told her exactly, it's like I got a couple of twenties in the wallet. I forgot those were there, but yeah, definitely something to keep in mind. Another con to credit cards, um and so what's interesting is that the last one so overspending,

Jesse meets him. He actually kind of touched on that a little bit. He's talking about an experiment that he's going to be conducting this year on himself. So Jesse meets him, the founder of y NAB you Need a Budget when when he came on the show. When he came on the show, yeah, we'll link to that episode in our show notes because we had an awesome conversation

about budgeting during that episode. But he also touched on an aspect of credit cards that we haven't really explored, which is again why I'm glad we're having this conversation now, which is he brought up, I guess the moral nature of credit cards. You know, he like, he brought the question as to whether or not it's ethical, and I think that's worth that's worth considering the fact that some folks benefit at the expense of others. That's that's definitely

one of the downsides of credit cards. Estimates show that fifteen billion dollars is redistributed annually from uneducated consumers who are using their credit cards improperly to educated ones the credit cards and you know, it's not the same as the lottery. But the truth is that lottery tickets, right, they often act like an additional tax on the poorest

in our society. Uh. And the tax dollars from a lot of purchases, they often fund things that then benefit those who have more, like funding higher education for middle and upper class kids. Well, credit card rewards are only a reality because a certain subset of the population ends up paying the bank uh pretty big money and interest on a consistent basis. That's where all those dollars come from. Uh. And so with that mind, should we avoid using them

because of this dynamic? Right? Like should you not take the scholarship money out there because of how these tax dollars were regarded? Well, we don't think so. That that being said, you know, these are personal questions that you'll

have to wrestle with. And for me, I think another way to maybe think about this is like supply and demand, right, And so, as an individual, if you want to no longer participate in using credit cards because you feel the rewards that you're getting are maybe unjust what you're doing, you're you're basically removing one small little bit of demand

of those rewards from the banks. But the thing is is that demand doesn't then immediately translate into reduced need for supply because the bank's essentially act as like a MetalMan.

And even though you're demanding less from the bank, does that mean that they're going to demand less from the people who are using credit cards and properly no. In fact, banks are better off because they're saying, Okay, there's a fewer rewards we need to we need to this smart you need to pay that guy who's feeling conflicted about about using our cards. And so if you want to

do that, I think that's that's totally fine. But you know, the our approach is to instead don't address the demand side of the equation, instead look at the supply part of the equation. First of all, I think it's better because, like you are directly helping and hopefully educating and informing an individual as to how it is that they should be using a credit card, and so literally there's changed that's happening there for that person who who you're able

to impact. But secondly, you are directly impacting the amount of money that these banks are making, and it forces change, right like they no longer have a choice. At some point, if enough people get educated and know enough people start changing habits and they're not paying interest to Visa and Master cards, they will have to then change the reward program. They're not gonna be able to offer the robust rewards.

The massive sign up onuses is the great travel points and the great secondary works like all that kind of stuff. Like they just have to say we gotta tamp down on all this, and credit cards are going to be as lucrative anymore. But I don't know of another way to up end the system. And so just focusing on

the demand side, in my opinion, just feels flawed. It's because thanks will continue to make bookoos of cash and then use that money to build nice buildings and all the cities of other quarters well, and it makes me think of credit scores. Just because the credits scoring system is flawed and the big credit heures suck majorly, that doesn't mean we opt out completely and we say credit scores don't matter. There's like a game we have to play.

We have to be savvy about the game. We're playing, and it doesn't mean we have to buy into a hook line and sinker, but it does. But I think removing ourselves from the equation isn't necessarily helping broader society,

and it's not the best move for us personally. But by the way, we are all on that notebat, we're all paying a price for the reality of credit cards no matter what we do, because Visa and master Card they make money from those swipe fees or the tap fees now you might call them, And very few retailers charge credit card users more than cash payers, So if you're paying in cash, you're actually subsidizing the benefits of credit card users receive because that swipe fee is built

into the sticker price. So you kind of might think about it like that too, you're kind of overcoming some of that swipe fee by using credit cards. Well, but um, yeah, So these are a few things. They're very much worth considering if you can't use them properly, if they lead you to overspend, if you're not sure about the ethical ramifications of credit cards, and if if you are worried about kind of the way the system works. Those are decent reasons I think to opt out, they're worth mentioning

at least. But now that we've talked about the downsides of credit card usage, Matt, let's talk about the pros and then we're actually going to give a credit card optimization strategy that Matt and I've kind of thought through. Well, we'll get to that right after this. Are we are talking about the proper way to use credit cards as

nature intended. And now that we just covered all the cons and hopefully I feel like we did make a pretty good case against using credit cards, even though we started making an argument for I guess for last we did not opting out there. I think there's just a more effective way of going about that with your actions on both. In both cases it's a very small impact that you're gonna have, but one of those still feels more impactful than the other. Well, and some individuals like that.

That's kind of uh. That's not a reason I don't think to ban credit cards or for everybody out there not to use them, but I think those some of those things will apply to some people. And if you can't use credit cards wisely, we have always said this that you shouldn't be using them, and that totally and let's be honest. When we look at the numbers, it is something close to half of Americans don't use credit cards. Wisely, they're not paying off their balance on time and in

full of your month. And if you are one of those people, you shouldn't be using credit cards at least for now. That doesn't mean that at some point, once you get your act together, that you can't start to re implement credit cards into how you use it. I'd go slow and steady and trying to make sure you don't keep yourself in this in the same position that you are in. But it's really important that to mention that for a lot of people, credit cards do not

make the most sense. Sure that being said, I think for our listeners, hopefully it's it's a higher percentage of folks who are their bills off. I would it's more like a D at least a D, I would hope. Yeah, what do you think? And I think so basically, there's a lot of people who really know what they're doing.

They're optimizing, and so this is a thing where yeah, they're like, well, yeah, I get that that's half Americans, but yeah, it's probably I think more of our listeners might be percent of how the money listeners right might be wrestling with, like the ethical side of things, and hopefully we gave some I don't know, at least a framework to help you to think about that for yourself.

But let's now talk about some of the prose, some of the arguments for using credit cards today, which, first of all, I mean it kind of feels like a necessity in our modern society, which I mean, I guess they aren't. Like you could use cash in some places and use a debit card everywhere else, but just given the reality of online commerce, it's really tough to get by without plastic in general. Can be like Amazon, I'm gonna mail you dollar bills? How's that gonna work out? Like?

Can I send you a check? Like is that even possible? I don't know. I don't think it is, don't think uh. And like similarly, Amazon actually does have some sort of weird system where you can go to a particular place and deposit cash and have it credited to your account. And forget exactly how that works, but I'm pretty sure they have something like that. But I'm going to look that up because a lot of actually fascinated by that. They're one of the only online retailers that offer something

like that. Okay, so it kind of makes me think about how necessary it is to have a car today, right because there, you know, someone could argue that they aren't totally necessary. That's that's definitely true. But your life would look a lot different if you only got around with your two legs, or if you only got around on a bike. Having a car it comes in handy when it's raining, when you're trying to get get out of town. Our recent trip to Louisville would have looked

a lot different if we didn't take a car. It would have uh. And similarly, it's really handy to have a credit card you use every now than I mean, we'll get some rewards in a little bit, but like, how else are you gonna pay for those plane tickets to Tahiti? You know, I'm not gonna pay for those like using cash, use the points for that. I'm not going to Tahiti, by the way, I'm still working on

that the Southwest Companion pass there. But we'll talk about you know, debit cards in a little bit and why we think they are actually inferior. But since we gave some of the best arguments against using credit cards. You know the fact that you might spend more that is questionable from an ethical standpoint. Let's definitely make sure that we are giving some of the best reasons for using them as well. Let's do it, okay. One thing, they

help you establish a credit score. And I mentioned before the break the credit scoring model not our favorite, but bottom line, it's how the financial industry works, and it's you know, when we're talking about an easily identifiable way of determining your credit worthiness, this is how it's done, right, this is how it's done now. And so you need to play the game to boost your score, and uh,

credit cards help you do that. Responsible credit card usage is one of those things that will contribute to a robust credit score. I mean yeah, like like is the I guess the new the new inquiries for credit Like that is the only thing that wouldn't necessarily be impacted by you having a credit card. Literally everything else that makes up your score is impacted by having a credit

card and paying it and using it properly. Yeah, and it's going to impact so many different things, right, having that great credit score, like what you pay for car insurance and that we just talked about it on a Friday flight. How much more you pay for car insurance if your credit score sucks a lot more, it's like

double like no joke. And so if you want to pay three thousand dollars a year because your credit score stinks because you said, I'm you know, I don't want to play by I'm not playing by your rules, Well you can do that, but it's gonna cost you money

in the long run. And so smart credit card usage over time will propel your score upward, which is a good thing when it comes to borrowing to get that home loan or know what you pay for car insurance, it's just going to have major ramifications on that front. It's also a good reason to have a credit card if you're planning to do some travels civically, if you're

looking to travel overseas. Again, you could use a debit card here, but credit cards they offer a superior exchange rate, and they ensure that that that you don't have to carry around a bunch of cash on your person and

of in a foreign place. You know, like you don't have to keep that cash fanny pack around your waist tucked into your pants, and I don't wanna have to mess with that, right, Some of our favorite cards come with a zero percent foreign transaction fee, so there's no charge to you there, But the exchange rate is also going to be better for you than pulling cash out of an A t M. With your debit card as well. I like taking my no foreign fee debit card as well.

And in case I am looking to pull a little bit of cash if you're gonna visit like a like an open air market, that kind of thing where they're only taking cash. But there's no way I would travel without an actual credit card in order to make most purchases that that you would incur while you're abroad, for sure. Yeah, you definitely want a little bit of loose cash for some things, you know, depending on where you're going and

what you're gonna do tip having some on hand for that. Yeah, And like let's say you're getting food at a little stall on the street or something like that, Like you're probably gonna want to pay in cash there, so you're gonna want to have some cash on your person. But credit cards for all of the purchases overseas just makes sense to me. That's a really important reason to have them. Also,

credit cards come with superior protections. And there was actually an article in the Washington Post last week, Matt where the author mentioned that she had charge from Apple on her card. No, she had not just bought a new MacBook. It was a fraudulent purchase. And and if that had happened with her debit card, she'd have an even bigger problem on her hands. She'd be trying to claw back stolen funds, which would have impacted her ability to pay

her other bills. Instead of just trying to get a fraudulent charge removed, which is a little pain in the butt, it would have been a much, much bigger headache. And and plus, if it takes you a while to notice, you could be out that money. For good debit cards, they just don't have the same protections, uh federally speaking,

from a legal standpoint as credit cards. And this is something that doesn't get mentioned enough, but it is something we see as a vitally important reason to prioritize credit cards as a method of payment. Those superior protections and the fact that you'll be hassled far less if fraud does occur. Man, those are two big check marks right

there in the credit card box from yeah. Yeah. Debit cards, they do have some protection, but you have to notice fraudulent transactions or you have to notice that your cards missing. If you don't notice that within two days, you can be on the on the hook for up to bucks. Uh. Here's the other thing, here's the real kicker, dude, if you don't notice within two months, and I'm sure most of our listeners again are thinking, how would you not notice a charge leaving your checking account? Of it? Who

do not budget, who do not track their expenses? And if that's you and there's been a fraudulent charge and it's been over two months, specifically sixty days, uh, there is no limit to the amount of money that you

are liable for. Uh. And so with with credit cards oftentimes there well there is a maximum of fifty dollars, but most cards say that you are liable for zero dollars for any fraud and the charges another pro Another argument for using credit cards is either it's it's easier to track spending and so maybe you're thinking, well, I do better, you know, putting cash in an actual envelope.

But if you're tracking your finances using digital means, like why nap you need to budget or using mint, it is so much easier to categorize and actually keep up with your spending into At the end of every year, Kate and I we always do a year, an annual review, and we look at where it is that we have spent our money that year. We compare it to previous years.

Like I've got a special sheet and I copy and paste all of those expenses over and we get to see different trends and we can see that, oh, wow, we are spending a lot more uh this this year. One of the things was was our grocery bill uh. And partly we've talked about this, but once we started shopping at Costco, we we saw that skyrocket. But it allows us to make some of these overarching, large changes to our budget. It allows us to kind of tighten

the belt in certain areas. It allows us to say, hey, we didn't spend in this one area even that we had set aside a certain amount of money. Let's make sure that we are working harder to spend our money in ways that we say is actually important to us. But you know, knowing where your money is going it is a personal finance necessity, and spending our credit cards and having those transactions accumulating just in one place like that,

it makes it so much easier from a money management perspective. Essentially, your statement that you receive, that you receive every month. It's almost as if you have your own personal like c f A and they're just like sending you financial reports of like here you go, sir uh. And that's not necessarily something you have if you if you are

doing the cash envelope system for sure. Yeah all right, So another pro of credit cards, and this one is the calling card really that most people associate as the biggest benefit of credit cards, which might not be the biggest benefit, but it's it's at least the one that gets the biggest headlines, and that is the rewards that you get from using credit cards. It's good, good that we say the best for last. Yes, yeah, well there's

more too, but we'll save that for later. But yeah, every everyone knows about this part of credit cards, and that's what most people are hankering for. Right. They can mentioned on every single commercial and and you know, we talk about the massively lucrative sign up bonuses and and then even more recurring rewards that smart people can maximize to the tune of thousands of dollars a year, or if you know you're not into dollars as much or into more valuable travel perks, you can do that as well.

And here's the other thing that makes these credit card rewards so valuable is that you don't get taxed on them, right, which just makes them even better. Because if you sign up for a new bank account to score a bonus, which I have done I did this past year, that money gets taxed. I just got in the mail my t N I N T from a bank saying hey, I'm glad you got the sign up bonus. Now Paynicle

Sam a portion of it. And so while that was still a good move for me to make, credit card bonuses don't come with any sort of taxes associated with them, and the rewards can be significant. But again, and I feel like we're gonna have to keep saying this, don't let the rewards tail wag the dog. Credit card rewards can be great, but spending more to juice your rewards is fool And that's again part of what the naysayers

will say about credit cards. Well, people get so excited about these rewards that they end up spending more than they should. And it's true for some people that they end up doing that, and you have to be careful. You have to be cautious because rewards can be great, but if you're spending more to get more rewards, it's just like spending money when you weren't intending to because

something was fifty off. I got this great discount, you know, and it's like, well, yeah, but you weren't planning on buying that, and so actually you you like to think that you saved, but you spent. Yeah, I totally agree. I think it's the same folks that might find fall prey to a really sweet deal, a really big sale, would be like, look how much money I saved. It's like, well, what if that sale didn't exist and you didn't spend any of that money at all to begin with? Where

you plan on my not that thing? Anyway, if you weren't yeah, again, you spent. You didn't say exactly, yeah, so it's yeah, like you said, important to keep in mind that those rewards, certainly they're not gonna make you rich, but they can be a nice perk. But in order to make sure that your desire for rewards isn't working against you. It's crucial to use your cards properly. Um, those rewards can feel exciting, right like, it can feel a lot of fun as you're getting thousands, you know.

It's it's also smart that they're not tying it to the actual dollar reward that you get, but it's to the scent, you know. You know, it's just like, oh, eighty thousand points. It's like yeah, yeah, like eighty thousand pennies, you know, yeah, I know it sounds nicer than it is, so exactly, it's slightly inflated there. But if you spend more because the bank says you can, right, or if you can't pay the bill on time every single month, using credit cards does not make sense. Minimum payments they

are not enough. The full balance needs to be paid. You've got to be disciplined in order for the rewards

to make sense, if not just completely avoid them all together. Okay, let's address debit cards here for a second to Matt, because we mentioned that they don't come with the same protections as credit cards, but a lot of people, a lot of people think, well, they're basically the same thing, and so I'm going to use debit cards because what's the difference, and it's preventing me from racking up debt and spending money that I don't have. And while I

get that, like desire, I get the impetus. They might look the same, but they they're not the same, and they don't have the same protections, and they don't offer the same rewards either. There's no sign up bonuses for debit cards. There are no free travel perks. There are also rarely any cash back rewards attached to debit cards either. In fact, you know, one of the only ones we know of is the Discover debit card, which gives you one percent cash back. So that's at least our favorite

from a debit card perspective. But even that's still not as rewarding as spending the spending you do with the credit card. But I think the biggest downer is those protections that debit cards lack that credit cards have. If changers were made to federal law to make debit cards have the have those exact same protections, I think I would feel more comfortable pushing people in that direction. But yeah, I don't want my cash ripped out of my account and then have to go like begging the bank to

keep it back. That sounds like a pain in the butt. But after the break, we're gonna talk about credit card optimization. How can you make the credit cards that you have worked better for you or get the one that maybe makes the most sense for how you spend. Well, we'll talk about that right after this. And it's now time

for the credit card optimization segment of our episode today, Joel. So, let's say someone's listening, they're on board with using their credit cards properly, right like they've got that souber view of how credit cards work, and maybe now you want to use them as a way to nab some rewards. And if that's you, so much of this, so much of your strategy is going to depend on how it is that you use credit cards and specifically what categories

you spend the most money on. So let's go ahead now and mention what we're gonna call the how the Money super Chill credit card optimization strategy. Brandy so sweet on that, Matt's a mouthful, but we think this is this really is an effective approach for most folks out there. So let's now discuss what this three card approach entails. And first of all, we think definitely includes the American Express Blue Cash Preferred card. That's one that most folks

will benefit from. It is important to point out that this card comes with a annual fee, which sounds like bad news bears, but you are looking at a six percent cash back reward at grocery stores as well as on streaming subscriptions as well. Joe and I we both love this card because we've got bigger families and be

we purchase a ton of groceries. That being said, it may not be worth it if let's say you're single, maybe you live by yourself, or you're always eating takeout, like because really, the grocery store is the main feature of this card exactly. And if that's the case, uh, you would be wasting every single year were you to get this card. Uh. And so an important number to keep in mind. There's a break even point between this card and the version of this card that does not

come with a fee. But the break even point is that you need to be spending at least eighty dollars a month on groceries in order to make the annual fee for this card worth it. Yeah, and I know a lot of people, especially if if they have a significant other, a partner, or even just a kid or two. They're definitely spending more than that, especially given what's happened with inflation and groceries this past year. Your family spend two hundred bucks a month just on eggs. It feels

like it right now. It certainly does, right And so yeah, if you're spending in the plus range on groceries, this is probably the first credit card you should have in your wallet, right, I mean six percent, Like literally, you're not going to find any card out there that is paying or cash back percentage this high, not that, not anywhere close. Using get this card, pay for your streaming, and pay for your groceries with it, and it's going

to pay for itself for sure. And the next card in this super show credit card optimization strategy is the City Custom Cash Card, which clocks in at five in

any single category of spending. So this is where your personal spending patterns come into play, because if you spend a big chunk of change every month eating out, then this is the card you're gonna want to use it restaurants and if you spend a ton at different gas stations, or let's say you spend a bunch at home depot and lows right, well, then this is your gas or

home improvement card. And then literally right on the card with the sharp piece that you get those max rewards in that specific category, and always use that credit card in that one place. Don't spend it anywhere else because you're only getting one percent on other categories. But the City Custom Cash Card is a great card for people to have to use and basically their top spending category. Yeah, beyond feel like everybody, most folks are going to be

going to the grocery store. It depends on how much you actually spend at the grocery store as to whether or not the Amix Blue Cash prefer It is gonna be worth it. But the next you're looking at that City Custom Cash Card. And then lastly, we think that everyone should have a basic two cash back card. There are two of these out there that have been around for a number of years now that we consistently recommend.

First of all, the Fidelity Visa is great. Uh, And what's cool about this card You can saw those rewards straight into an IRA, which is super cool. You know, like, we're totally fine with you earning points for free travel. I like free flights, but at least with the monetary perks that you get from these straight up cash back cards.

I love the idea of you using them as a way to invest for your future, right, Like, this is an income that you're banking on, uh and so instead of splurging maybe a little bit extra, just toss those those few extra dollars every month into your roth IRA or into even a taxable brokerage account if you're already

maxing out your IRA. But it would be really cool to see just how much those reward dollars could grow for your future when invested, uh in, particularly if you are finding it difficult to get investing or or maybe you're finding that you haven't been able to max out some of you know, your IRA A and I think this is an awesome way to kind of give you that boost that future you will most definitely appreciate. Yeah, So this credit card optimization strategy really entails getting three cards.

The m X Blue Cash Preferred is one, the City Custom Cash is two, and then a two percent cash back card is third, either the Fidelity Visa the match just mentioned, or the City Double Cash, which is another one of our favorites that consistently pays two percent cash back on everything, which is also well worth considering. So get those three cards, and that's really for most people going to optimize your rewards without overthinking it. Right, It's

a it's a simple strategy to maximizing rewards. And we actually have an article kind of outlining how this works that will link to in the show notes for this episode that you can check out and you can kind of read and see like, Okay, now this makes sense because hopefully I was talking about it makes sense, but sometimes reading it makes will help it make more sense.

But some of you might be saying, well, I can optimize more than that, though, right of course you can, Like I think we just wanted to offer a an easy like way to start for people to say, like, you don't have to overthink it, and there's ways for you to get six percent back on a lot of things, five percent back on a lot of things, and two percent back on everything else, and you don't have to deal with rewards and redemption ends and stuff like that

for travolving categories things changing like that's personally, I'm not a huge fan of that. I don't like jumping through some of those additional hoops. The ability to kind of set it and forget it is what this optimization strategy is all about. It's like a simple method really for people to do the basics to score the low hanging

fruit by using credit cards. But then yeah, if you're a superorganized person, you might might make sense for you to open additional cards over time to score extra rewards. We're not against that at all, and Matt and I we do that ourselves, but yeah, I just wanted to at least give you that simple strategy. But like, because let's say you're a renter. The Built credit card is literally the only credit card on the market that offers you rewards just for paying rent, and it is possible.

This is a real card, and and there's not any other card that offers the same feature, Like, you can't get get paid, get rewards for paying rent except for with this credit card. You can check out our review of that card at how the Money dot com slash Built b I lt But you know, this would be a very solid fourth card renters, even if you only use it to pay rent each month. There's no annual

fee either, which makes this one really worthwhile and attractive. Uh, and you can also go to our how to Money credit card tool how the Money dot Com slash credit cards as credit card tool out there, man, and you can click a few buttons and you can easily filter

based on kind of the rewards that that you're looking for. Specifically, yes, specifically by whether or not you're looking at getting cash back, or if you're looking for points from an airline, and then specifically what airline that you are looking to get those points with. And if you're a business owner, some of those business cards are even more lucrative, and you can click the business button right there and you can

filter by that. Yeah, that's an awesome tool. But aside from the specific credit cards out there, there are a couple of ways that we want to discuss here to make credit cards work even better for you, and we would recommend you trying to negotiate with your credit card issue where specifically to ask for a reduction on that annual fee. Some of those travel cards out there, the annual fee it's pretty stinking high. And case some point here,

our friend Scott Rickens, he literally had chat GPT. So that's the you know, the AI that has been all up in the headlines Uh, you're living under a rock if you missed GPTU. He had it right a script for him to ask for an annual fee reduction. He said it was it was super easy to do, saved him five hundred bucks. He's talking. I think it was like the is amex Platinum card that he was referring to. It's got like a five four annual fee, but it only took him ten minutes. Will link to the Twitter

thread where he was talking about that. But you know, to to be able to have your cake and eat it too by by getting a great card with sick perks, with sick benefits, all while avoiding hefty fees. We're all for that. Yeah, Okay. One other way to kind of maximize credit cards in your life is to take advantage of the hidden benefits that credit cards offer and the rewards a sign up bonuses, those get all the press. That's what you know again is in the commercials, that's

what they're publicly touting. But the best credit cards offer benefits that go beyond those headline rewards. So for instance, with some cards, you can get primary a rental car coverage. That's actually what that built card. I just mentioned that. How the money dot Com slash b I lt that card that can where you can earn for paying rental. You can also get primary rental card coverage, which is incredible. Not many cards even offer that, all with zero annual fee.

I mean that that's a really sweet secondary park that most people don't talk about. Chrip cancelation insurance comes with other credit cards to airport lounge access. Cell phone insurance if you pay your cell phone bill with a particular card, like the Built card every single month. It's one of those things where you drop your phone, you lose your phone. Guess what, it's ensured. Those can be just as rewarding though as the headline cash back number and the travel

words you might get with some cards. It's just worth mentioning, Like, dig into that fine print and see, okay, well, what what is this credit card offering in addition to just two percent cash back or in addition to that five percent in my favorite category? What else is it gonna give me on top of that? And then optimize your credit card use accordingly? That's right, man, dig into those benefits. And if you use credit cards properly, they can kind

of act like an interest free loan. Uh, not only that, they can award you even greater benefits like cash rewards, free travel. That's what we've been discussing just now again. Do the banks get rich off of folks using credit cards? Yeah, there are too many people out there who are using

credit cards poorly. The rest of us wouldn't have access to these perks if they started changing their spending habits and if they pay their their credit card debt off, if credit card rewards evaporated, because that became a reality, would we be happy about that? Absolutely? But that's not the way that the world works. That's not how our financial system are. You know, it's not structured that way,

at least not yet. Uh. And so we've all got to make up our mind about how and even if we're going to partake and use credit cards in the world that's polarized by them here at how the money. We are all for smart use. But this is one that we think good folks can hopefully agree to disagree on. I agreed. And and the way if you're listening to this and you're like, I'm in credit card debt, well that's something that's like a hot high priority for us, is we want to see you get out of that.

And we've got resources on how to money dot com to help you figure out make a plan to pay off your debt, and prior episodes as well that speak to debt payoff and creating a plan so you can get rid of it sooner than later. That's really important, and it's really important that you not use those credit cards for the time being while you're getting out of it. You don't want to continue to dig yourself a hole while you're also trying to crawl out of it. Like

that's that's not a good strategy. So if you haven't had good habits with credit cards, we want you to develop those, but maybe wait until after you're out of the debt all the way to even consider starting again. And and also, by the way, if you want to learn more about our super chill credit card optimization strategy, you can go to how the Money dot com slash optimized to check that one out. But Matt, let's get

back to the beer for this episode. This one was called The Judge and it's by Memphis Made Brewing Company. Or your thoughts on this chock Vanilla porter, I thought it was pretty tasty. Man. We don't often have porters here on the show, and so I'm always it's always fun to have a different style that we don't often

frequently drink. But that being said, I felt like, uh, you know, when you have a piece of toast and it's been toasted like a little bit too long and it gets it's not like bitter, but it has been like a little bit of those like bitter chocolate notes like on the malts, like on the actual grains. That's what this one kind of reminded me of, especially the first sip I took. I don't know, that's the that's definitely what came to mind, Like before you put the

butter on there. Uh you know, so I feel like the butter kind of sweetens it up a little bit. But yeah, that being said, I definitely enjoyed it. Nice would you think, Yeah, I mean, well, chocolate vanilla, I'm kind of a basic dude. I like chocolate vanilla, like give me a swirl ice cream calling I'm a happy guy. So this one, yeah, it's like because those the two basic ingredients kind of had that swirl elements that taste

going on. So nice. I liked it, and porters aren't typically my favorite, but I thought this one was was pretty tasty. Yeah, well, it's just nice to have some of these darker flavors without getting really filled up. And oftentimes you will get filled up more often with a stout and with a porter. You get all that flavor, but you get it without all that body, without all without all that weight. That's a little bit lighter for sure. Exactly.

All right, Well, I definitely enjoyed it. That's gonna do it for this episode. For folks who want the show notes, you can find those up on our site at how to money dot com and will link to a lot of the resources that we mentioned in today's show. But Matt, that's gonna do it for this episode. Until next time, best Friends Out, Best Friends Out.