Why Use Credit Cards For F.I.R.E?

Credit cards often get a bad reputation because they are often associated with overspending, high-interest rates, and lack of self-control. However, it doesn’t need to be this way. There is a safe, practical, and intelligent way to utilize credit cards in your personal finances.

If you want to achieve financial independence, and retire early, then credit cards can be an even more useful tool because you can maximize their benefits to you without experiencing any of their drawbacks. I believe the primary benefits to those of us in the F.I.R.E community are as follows:

• Financial tracking
• Credit score building
• One payment per month
• Liability protection
• Cashback
• Travel Rewards
• Other Perks

Click here to see a list of my favorite credit cards!

Financial Tracking

One reason why credit cards are often a good choice for those on the path to FI is that they allow us to easily track our finances. Credit cards make tracking all of our purchases automatic. We link up all our credit cards onto one financial platform such as Personal Capital (what I personally use) and see all of our purchases across several credit cards all in one place. You can’t do that with cash! You can do that with debit cards, BUT debit cards won’t help you with the next benefit…

Credit Score Building

That’s right, “credit” cards can help build your credit. Who would have thought? In all seriousness, having a strong credit score is paramount to those of us in the F.I.R.E community because we may need to utilize our credit in order to obtain the best rates on mortgages for our primary residence, the best rates for loans on our rental properties, or simply to get the best credit cards that have tons of benefits for us. Credit cards can build our credit even without us ever having to pay a cent of interest charges. Seriously, that’s not all credit cards can do for us, they also allow for…

One Payment Per Month

Using a credit card can allow us to perfect our monthly cash flow because we only have to make 1 large payment per month from our checking accounts, rather than dozens of small charges like you would using a debit card. I believe the one payment-per-month system is superior for budgeting and cash flow management. When you make only one payment per month known as your “statement balance” you are essentially paying off the ≈1-month interest-free loan that the credit card company gave you. How nice of them! Credit card companies also give us another amazing benefit for free…

Liability Protection

Credit card companies offer some amazing liability protection for us consumers that you simply cannot get when you use cash or debit cards. Many banks and issuers have what’s known as a “zero liability policy” which usually means that we are not responsible for any unauthorized charges to our credit cards. Of course, it is still important that we remain vigilant and in control of our cards, but still, this level of protection is so important for peace of mind and security. Beyond the basics of why using a credit card instead of cash or debit cards is superior, there is also the fact that you can get PAID to use credit cards…

Cash Back

Many of the best credit cards out there offer cashback on every purchase. This is another huge reason why you should responsibly be using credit cards…it is passive income! Cashback on your normal spending is literally the definition of passive income. Many credit cards pay anywhere from 1%-5% back on purchases (usually special categories can earn higher cash-back percentages). Imagine if you spend about $5,000 per month on all your regular spending and you used a 2% cashback credit card for it! That would be $100 in passive income per month without any additional effort on your part!

Click here to see a list of my favorite cashback credit cards!

Travel Rewards

Not only can you get cashback with credit cards, but you can also build up “points” and “miles” for various travel programs such as airlines and hotels. If you like to travel at all (even just once per year) then oftentimes, using cards that pay travel rewards can be even more lucrative than cashback! For example, if you get 2 “points” per every dollar that you spend, and you spend about $5,000 per month, then that would mean that you would gain about 10,000 points per month. If those 10,000 “points” can get you one night in a hotel that costs $200 per night then those “points” would be worth $0.02 each to you. By the way, this is entirely possible and extremely commonplace in the world of travel rewards credit cards!

Click here to see a list of my favorite travel rewards credit cards!

Other Perks

I couldn’t stop writing this without at least touching on the fact that a lot of credit cards can offer many other perks not related to those I mentioned previously. There are a lot of great perks offered depending on the card, and some examples include, but certainly are not limited to, purchase protection, travel insurance, rental car insurance, cell phone insurance, roadside assistance, free checked bags, free hotel night certificates, free airport lounge access, and so much more! Don’t let all of this overwhelm you. Play it smart and start with a simple approach to building your credit card strategy. It will benefit your journey to financial independence. To get started, make sure that you check out my recommendations.

Click here to see my recommended cards!