Why I Treat My Credit Cards Like Debit Cards

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I’ve always said the best (and quickest) way to earn lots of miles & points for Big Travel is from credit card sign-up bonuses and spending.

But there are still folks out there who balk at applying for lots of cards.  They’re afraid their credit score will suffer, or that they’ll spend more they can afford and end up in debt.

This hobby is NOT for everyone.  If over-spending tempts you, or if you’re not good at budgeting and keeping track of expenses, you might get yourself in trouble.

One trick I always use to make sure I don’t spend too much or end up carrying a balance is treating my credit cards like debit cards.

Why I Treat My Credit Cards Like Debit Cards

Can You Manage Your Spending and Stick to a Budget?

I’ll explain how folks in our hobby maintain a high credit score and share some tricks that make it easier to manage your credit card spending.

Don’t Spend More You Can Afford!

By treating your credit cards like debit cards, you’ll avoid spending more than you have in your bank account!

I try not to rack up charges unless I know I’ve got the money to immediately pay them off.

And it’s best to avoid spending based on the fact that you’ll get paid in a week, or two.  That’s an easy way to fall behind!

Why I Treat My Credit Cards Like Debit Cards

Don’t Be Tempted by Spending Money Before It’s Actually in Your Bank Account

Some folks stay organized by paying their bills on the same day each month, even if they’re not due until later.

For example, my buddy pays all his credit cards on the 1st of the month.  In full.  Regardless of when they’re actually due.

Other folks pay their credit card every time they make a purchase.  That seems like a lot of work to me, but it could help you avoid spending more than you have.

It never makes sense to carry a balance.  The interest you’ll pay (often more than 20%!) negates the value of the miles & points you’ll earn.

Stay Organized

Being in this hobby requires a good deal of fiscal responsibility and organization.  It is NOT for everyone!  Only you know if you’re disciplined enough to stick to a budget and keep good records.

I (and many others in our hobby) use a spreadsheet to track the cards I’ve applied for, sign-up bonus, approval date, the minimum spending requirement and deadline, and when I completed the spending.

Why I Treat My Credit Cards Like Debit Cards

Folks Who Like to Keep Organized Can Do Very Well In Our Hobby!

And I keep a separate spreadsheet showing the payment due dates for each card I use.

But I also know folks who manage to keep track of everything using sticky notes and a paper notebook!  Do whatever works for you – but stay on top of it!

It can be discouraging to lose track of your cards and deadlines.  I’d be heartbroken if I missed out on a big bonus if I didn’t meet a spending requirement on time!

Start Slow, Protect Your Credit Score

I’ve always said if you’re new to miles & points, it’s best to start slow and only apply for 1 or 2 cards.  That way, you can assess the impact on your credit score and see if you can handle the record-keeping and spending required!

Folks who’ve been in our hobby for a while typically have excellent credit scores.  That’s despite opening lots of credit cards!

Remember, according to FICO, your credit score is based on the following factors:

  • 35% Payment History
  • 30% Amounts Owed
  • 15% Length of Credit History
  • 10% New Credit
  • 10% Types of Credit
Why I Treat My Credit Cards Like Debit Cards

Your Payment History and Amounts Owed Are the Biggest Factors Affecting Your Credit Score

Notice that your payment history (do you pay your bills on time?) and amounts owed (do you carry a balance?) account for 65% of your FICO score.

So folks who don’t carry a balance and always pay their bills on-time and in full typically have the highest credit scores.

Remember, you can get your FICO score for free by having certain credit cards.  Or get an estimate of your score from free sites like Credit Karma.

Bottom Line

Being successful in our miles & points hobby requires discipline and organization!  To maintain a good credit score and avoid going into debt, I treat my credit cards like debit cards.

This means I never spend more money than I have in the bank.  And I always pay my cards in full each month.

Staying organized with spreadsheets (or whatever method you prefer) will help you stick to a budget and keep track of your spending.  Not everyone is good at this!  So if you’re new, start slow to see how you handle your new credit cards!

Do you have any tips or tricks to share?  How do you stay organized and avoid over-spending?

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7 responses to “Why I Treat My Credit Cards Like Debit Cards

  1. This is absolutely correct. The sad reality is that most people don’t do this. At the same time, if everyone was responsible, credit card companies wouldn’t offer nice sign up bonuses as they wouldn’t be making money. The good news for responsible people is that credit card companies will continue to offer great sign up bonuses as they can expect a high percentage of people to manage their money poorly and pay lots of interest. For the minority that handles their money well, they will benefit.

    Your blog absolutely gives the right advice, but the reality is that banks love to pay you to advertise because they realize that a large percentage of people who read your blog will not actually manage their money well. Sad but true.

  2. I’m in between the good and bad place with finances. I’m pretty constantly in debt, but with the way I manage things, I pay no interest, and my credit score stays in the high 700’s. Have about 8-12 cc’s now, zero balance. Utilize retirement loans, which I pay interest back into the account. Ultimately it just boils down to that I put more into my retirement account than I can afford with the lifestyle I want to live. Currently have 245K+ miles/points balance. Just spent 330K miles for RT business airfare to the Maldives for 2.

  3. My best friend recently mentioned she wanted to get discounted airfare so I told her to open a Southwest cc. She responded saying she cannot manage cc’s and was in debt consolidation program working on paying them off. At least she was honest, but will miss out. But to her she rather not take the risk.

  4. I only spend on the card I’m currently trying to hit the minimum spend on, then I pull it out of my wallet and go back to my “go to” card. Overtime I’ve ended up with quite a few accounts opened that I only used the 1st few months.
    My spreadsheet is full of “0” balances for card that are rarely if ever used

  5. Can anyone share spreadsheets they use

  6. Suzy Travel 101 has spreadsheets in tutorial. http://www.travelmiles101.com/travel-miles-101-course-index. Also look at award wallet to track CC

  7. I decided to try this points and miles thing June of 2015. Everywhere I read it said it would not make my score go down (obviously if I pay on time, etc.). I have found this not to be true for me and I can’t understand why. I have zero bad marks on my credit, never had a late payment, I pay the balance in full to avoid interest (except when I have a 0% for x many months deal). I paid off my house last summer and have no loans. When I look at the scores shown on the credit card sites it seems like the only 2 negatives are length of accounts held and number of new accounts/inquiries. I opened just 6 cards from June thru December of 2015, and so far in 2016 I have opened 5 more credit card accounts. Barclay card site shows my FICO at 843 in June of 2015,and now it has dropped to 793 for a total of 50 points dropped. Amex card site shows my current Fico as 782 as of March 19th. Walmart card site shows my current FICO started at 849 in June of 2015, and 793 Feb 2016 that’s 56 points lower. How are some people able to open several new cards a year and not see their score go down? I don’t know what I can do to fix this, other than stop opening new accounts for quite a few months. Thank you for any suggestions.