The credit game

Note:  This is not expert advice, as always with your money research it yourself, talk to those whom you trust, and get real advice before investing.  Risk is always a factor.

When I was young, my Dad gave me a real important piece of financial advice.  He said, “With money, there are two types of people, those who pay interest and never have enough, and those who make interest and always have some.”  Now he might not have said it just like that, and he was probably quoting somebody much smarter (smarter then my Dad?  Unlikely), but it stuck.  I always wanted to be one of those that makes interest.  So I’ve avoided debt like the plague.  One of my main reasons for joining the Navy was so that I could have money for college without having to work full time or take out those huge burden student loans.

But does that mean you shouldn’t get a credit card?  Hell no.  You just get them to pay you interest, and never return the favor.  First I’ll explain the rules, and then I’ll demonstrate on how this will MAKE you money:

1. If you don’t already have one, get a free checking account from your local or branch bank.
2. Setup a savings account at your bank as well, make sure there are no transaction fee’s and find one that is easy to transfer to and from, money market based savings account offer a good rate with relatively low risk.
3. Setup automatic deposits from your place of employment into the savings account (Hassle free and the normally the quickest way to get your money)
4. Find a a good credit card.  No monthly or annual fees, no finance fees, and 25+ day grace period (critical).  There are plenty, and with the way credit card companies operate these days ANYONE can get one of these cards (My friend Gabe just got an offer in the mail addressed to his dog).  It’s a bonus if you can get one that has some form of rewards program (I use a card that gives me United Frequent Flyer miles, but often the cards that give 1.5% or 2% cash back are better, depending on how much you fly).  I would recommend Wamu, you can get a card almost immediately online from them AND they offer free monthly tracking of your credit score (I’ll explain this later).
5. This is key:  Setup automatic FULL payment for your credit card from your checking account.  Make sure you have enough money in the checking account to pay off your bills every month.
6. Put everything that you normally buy on your credit card.
7. STAY WITHIN YOUR LIMITS.  Don’t spend money that you don’t have, and don’t spend money that you “plan” on making.  The whole game falls apart if you can’t pay your bills.  One way to do this is to keep a purchase log, a running tally of how much money is in your checking account.  Verify this online (most banks have that option).
8. When your credit card statement comes in, transfer the FULL balance from your savings account into the checking account (to get the most money value, future date this transfer to be made a few business days before your credit card automatically pays)
9. Profit.

I’ve been playing this game since I was old enough to apply for my first Credit card, and I’ve racked up a pretty high score.  They keep increase my credit limit, despite the fact that I’ve never paid late, and therefore never paid them any money in regular interest, ever.  Who knows, maybe it’s some way to try to trap me into spending more then I can pay off, but they’ll never catch me