The survivalist and emergency preparedness lifestyle isn’t just limited to building tents and shooting guns. We believe that the lifestyle also embodies an informed and utilitarian approach to the world at large. As a result, we occasionally dive into some more practical topics – one of them being credit cards which is something that seems to be poorly understood by many people.
Credit cards can essentially be thought of as short term loans. Pay back your loan within the specified timeframe and you are not charged any interest. It’s that simple.
So – why would you take out a short term loan instead of just paying for everything with a debit card? Well, credit card companies quite literally pay you to use their product. This concept of cash back, credit card points, or airline miles should not be new to anyone. It’s one of the major advantages of the credit card industry and largely why consumers (the smart ones at least) use them. By not funneling your expenses through a credit card, you are potentially leaving a lot of money on the table.
Many banks are beginning to adopt the practice of issuing rewards for those who spend using their debit cards. However, these rewards and advantages tend to pale in comparison to those offered by credit card companies. Credit cards offer better consumer protection, higher rewards, miscellaneous benefits like extended warranties, more financial flexibility, concierge services, and an opportunity to build credit history.
The average American spends roughly $54,000 per year on life expenses which include food, housing, clothing, transportation, healthcare, entertainment, insurance, and more. Since not every expenditure can be made with a credit card (mortgage payments for example), we’ll assume that only half of those expenses can be made through your credit card. That leaves you with a potential credit card expenditure of $27,000. Even with an entry level 1% reward, you would receive $270 every year for doing absolutely nothing other than paying with your credit card.
Debt: Credit cards are a very good medium for figuring out how terrible (or how good) you are at personal responsibility or financial planning. In theory, credit cards pose absolutely zero risk. There is nothing secret or hidden about the manner in which these companies conduct business. Pay off your balance by the end of the billing cycle and it will be nothing but smooth sailing. Treat it like a debit card.
Annual Fee: Unless there is a card-specific perk that you really want, there is no real reason to sign with a credit card that has an annual fee. There are plenty of credit cards that still have lucrative cashback programs and no annual fee.
Sign-Up Bonus: Many credit cards will give you an immediate bonus just for signing up with them. The rewards often range from airline miles, a few hundred dollars, or gift cards. These tend to be harder to find with no-annual fee credit cards but they do exist (For example, Amazon’s Visa credit card has no annual fee AND gives you a $50 Amazon giftcard just for signing up)
The yearly return might seem quite trivial for some people. However, credit card usage is just one of many components that contribute to wise financial planning. Making every effort to practice the art will have a snowball effect and result in much more financial independence for yourself.