Using Credit Cards 104: Experts Using Leverage

Today we will get to the fun part of using credit cards. You only become an expert credit card user after you have mastered the game of money and finances.

We will review what mastering the game means and how we can all get on track to reach this fantastic accomplishment. Welcome back to the Using Credit Cards 101 series (Beginner, Intermediate, Advanced), where we overcome “retail therapy.”

Life is good. I wanted to give a quick shout-out to life before I get started. I woke up yesterday to a $41 dividend from Altria (MO), and today to $41 and $22 dividends from AGNC (AGNC) and Phillip Morris (PM).

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I am $80 under my monthly San Diego budget and have no credit card debt. I invested $650 into my Dividend Debit Card yesterday.

My finances are under control and beginning to thrive, even here in California. Reflecting on 2019, I remember my money situation being a mess. I am slowly mastering the game of money.

Mastering the game of money. Before using credit cards to expand our empire, we must already have a kingdom. We must have some things in place to ensure we never fall into credit card debt again. 

Before I begin my journey to becoming an expert credit card user, let’s look at what I would need.

1. Fully funded an emergency fund ($100,000) in my High Yield Savings Account.
2. A house maintenance fund for each of my houses (3 x $10,000).
3. Monthly dividend income of $3,000.
4. Monthly Amazon book royalties of $1,000.
5. Monthly rents of $3,000.

These requirements look eerily similar to my retirement requirements, don’t they? I work towards these goals every day that I go to work, invest, and write books.

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Becoming an expert. Why do I put such extreme goals on my path to becoming an expert? When you play with credit cards, you are playing with fire.

You can have one bad month, which entirely changes your financial life. Let’s say you had $5,000 cash in your vacation fund.

You wanted to pay for your entire cruise trip on your credit card to earn points, then pay it off with cash. You put the $5,000 on your credit card.

However, another emergency requires your cash flow before you can pay the money. Now, you are paying 12% interest on your credit card for 5-6 months.

If a couple of incidents happen like this over a year or so, you can quickly go from being debt-free to $10,000 in credit card debt.

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That’s why we want savings, cash flow, and the right mindset before we aim to become an expert. I am currently an advanced credit card user, working towards being an expert—I have another 3-4 years as an advanced user.

The perks of becoming an expert. Once you have the tools and mindset in place, the world is yours. You will have the financial leverage to dominate American consumerism.

American companies offer many perks to everyone, but few are expert credit card users. They do this because most people will find themselves in financial turmoil when trying to leverage these deals.

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Let’s quickly review some of the deals, perks, points, rewards, and benefits an expert user can use to their benefit.

1. Credit card churning. Want to make a quick $300 or $400? You can open a credit card, spend $5,000 on it, and companies will give you a bonus. Of course, you should have $100,000 in the bank to pay off that $5,000 quickly.
2. New user perks. When shopping on Amazon and other places, they offer 10-20% off when opening a card. What if you want to buy an exercise machine for $6,000? You could save $600-$1,200 by opening the card, paying it off, and closing it within a few months.
3. Travel perks. You can get credit cards for airplanes, rental cars, and hotel perks and rewards. You can use these cards daily and pay the balance at the end of the month.
4. Platinum and black cards. Some cards offer even bigger perks like valet parking and concierge services. They have massive annual fees, but you can earn back your money if you leverage the perks.

A whole new world. Of course, these benefits seem impressive; however, you are entering a whole new world. The banks expect you to be an expert user when they give you these cards. 

You can get yourself into deep trouble by not following annual payments and running a balance. The banks will penalize you heavily for keeping a tab.

I am not interested in entering this world at the moment. I love the simplicity of my one percent cashback debit card. I also receive cash dividends to keep on hand for special events—life is good!

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I may become an expert later. However, that’s not to say I won’t become an expert credit card user later. If we are traveling back and forth between Turkey and Florida, why not rack up frequent flier points?

There is always a deal when using credit cards; most people aren’t in a position to take advantage of the deal correctly. I can see myself taking advantage of special deals and using them individually—not part of a bigger game plan.

I don’t like the idea of paying for all my living expenses and luxuries throughout the month with credit cards. I fought so hard to become an advanced user that this seemed counterproductive.

I do not want to go back to being a consumerist. I love living below my means, operating as a minimalist, and only buying what I need. 

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You may be different and find that life as an expert user helps you build wealth by saving on flights, hotels, and sporting events. An expert understands how credit cards can help them achieve their financial goals, not destroy them.

Conclusion. I love having no credit card debt. I don’t know if I ever want to see a credit card balance again, even if I have $100,000 in the bank.

However, some travel perks and free hotel stays interest me. So, as I become an expert, I expect to leverage those benefits to my advantage.

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How can becoming an expert help you build wealth? What are your financial requirements before beginning the path to becoming an expert?

In this series, we started as young people with $1,000 in our savings account and became older folks with over $100,000. Chances are we got into credit card debt and recovered.

The most crucial part of using credit cards is fighting toxic consumerism—the need to spend money without thinking. Credit cards will always be a part of our lives, so we need to control our spending habits and use cards efficiently and effectively.

I hope these articles help you into a better financial mindset. This information is hard to find in a consumer-first society. You take control of your life when you put credit cards in their rightful place. Good Luck!

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