Saving Money Little by Little: #5 - Using a Credit Card

The title of this post seems a little strange doesn't it? Seriously, Brooke, save money by using a credit card? I'm pretty sure finances don't work that way.

I know, I know. This concept might be a tough one for some. Everyone has different opinions on it and I know Dave Ramsey would definitely not approve but hear me out.

Many people who seek to become debt free make their first baby step by cutting up their credit card. They then pay off the debt from said credit card and vow to never own one of those little plastic demons again.

Well, I have a confession to make: the hubs and I have and frequently use a credit card.

(insert gasps of horror here)

What we don't have, however, is any credit card debt. Well, at least not at the end of every month.

The hubs and I are tempted by many things in life (cursed ice cream) but, for whatever reason, the Good Lord has not let overspending through the use of a credit card be one of them.

I know it might sound crazy but neither of us are tempted at all to spend more than what we make. The knowledge of either staying debt free or saving for something that will keep us debt free just feels too good to compromise by overspending. In all honesty, I'm not even 100% sure what our credit limit is because it doesn't matter - we never charge more on our credit card than what we've budgeted for each month.

The hubs and I basically use our credit card as our debit card. We only spend as much we've budgeted to spend and, at the end of every month, we completely pay off our credit card balance. The credit card company has no time to charge us interest and we have a zero balance to start the next month. For those that are wondering how this affects our credit score, you need not worry, our credit score is fantastic. 

Using the credit card allows us to earn cash back rewards as well as keep Brad's paycheck in the bank to earn as much interest as possible for as long as possible.

Do we make millions of dollars off of this concept? No. But we do make some extra money and extra money is awesome.

Cash Back Rewards: We usually reap most of the benefits of our cash back rewards at Christmas time when we have a lot of added expenses. The hubs and I don't touch our rewards for the months leading up to Christmas and by the time gift-giving season gets here, we have a lump sum to put towards gifts that we wouldn't have had if we had not used our credit card.

Interest Earned from our Checking Account: The hubs and I don't earn a ton of interest off of what we have in the bank. I'd say our rate of return is pretty comparable to other banks. But we do earn more interest by keeping all of the hub's paycheck in the bank for almost all of the month. Once his new month's paycheck comes in, we use his previous month's paycheck to pay off our credit card and other bills. There is hardly ever a point when we are earning interest on anything less than Brad's entire paycheck. And, over time, that adds up.

Some things to note:

1. The hubs and I only have one credit card. We don't use different cards for different purchases.
2. We took a decent amount of time to research which card would be best for us. For example, we don't fly much so a card that offers rewards in the form of cash is better for us than a card that offers rewards in the form of airline miles. If, however, your family travels a lot, a card that offers rewards in the form of airline miles may save you more money in the long run than a card that offers cash back. There are many different options out there but you need to be patient in determining which is right for you.
3. This concept only works if there is no temptation to overspend or you are able to control that temptation. Please don't go out getting credit cards because "Brooke said I could" only to find yourself in more debt.

People have many different opinions on the advantages and disadvantages of a credit card. If you happen to be anti-credit, I totally understand, this is just what works for us and we get to put some extra money in our pocket along the way.

So that's way #5 of how we save, or rather, earn more money to save, little by little.

Find other little ways we save money by clicking here!