If you use your credit card intelligently, you could be well on your way to a 7 figure net worth. No, I’m not suggesting that you lean on your credit card to invest in Facebook. What I’m saying is that you can emulate the credit card habits of millionaires (and avoid credit card tricks) in order to increase your chances of becoming wealthy. Now, just because you act like a millionaire doesn’t automatically mean you will become one. But it never hurts to exhibit good habits. Am I right?
According to Investment News Magazine, there are 5 habits millionaires have when it comes to using credit cards. See how many you share with them:
- Millionaires don’t carry balances. They pay off their credit cards every month.
- Millionaires pay on time so they don’t pay late fees.
- Millionaires download their transactions into budgeting software.
- Millionaires use single-transaction credit card numbers when they do business on the internet.
- Millionaires don’t worry about mileage cards. They focus on cash-back cards instead and they get that cash automatically deposited into their investment accounts rather than being sent a check.
Let’s look at each point above:
It’s obvious that if you don’t have any credit card debt you won’t incur interest expenses or pay late fees. It also indicates that you won’t live beyond your means. These two behaviors also save you the hassle of running around moving money and trying to borrow from Peter to pay Paul. Sounds about right to me.
I’d have to say that not having credit card debt and living below your means are key success ingredients if you want to be financially independent. So far so good.
Downloading transactions also makes sense. This is really the only efficient way to know how much you spend and how you spend it. One program I love is YNAB (You Need a Budget) because I can quickly set up budgets and then compare my actual spending to that budget. By so doing, I can pinpoint where I need to adjust my spending. It just takes all the guess work out of it. Finally, this saves a tremendous amount of time when it comes to planning. Downloading transactions and studying the data is the first step to take if you want to be rich.
3. Single Transaction Cards
The concept of using single use credit cards for internet transactions is smart. Frankly, I haven’t done this but I can see the logic. Using my card on the net has created problems. I have to cancel my credit cards at least once a year because my number gets compromised. Then I spend hours changing all the auto payments I’ve set up to the new account. Time waster.
Of course, I don’t know if the problem is caused by thieves over the internet or what. But I can see that using single use cards cuts way back on the possibility of this happening. That’s another big time saver right there.
The last item is interesting and it’s something I’ll also have to start doing. The research that Investment News did indicates that cash back is far more valuable than miles and credit card reward points. Also, mileage cards have annual fees (usually) and cash back cards don’t.
5. Late Fees
I already addressed this point above. If you don’t carry a balance you should never have a late fee. If you do, it simply means you aren’t organized. The solution is easy enough – put your payments on auto pay. You’ll never incur a late fee ever again.
Again, just because you act like a millionaire doesn’t mean you’re going to become one. But even if you don’t reach the 7 figure status, it only makes sense to take smart action. The points above seem very wise to me. They save money and time.
Do you agree with how millionaires use credit cards? What is a smarter strategy?