The following is a list of 6 guidelines to follow if you’re going to play the points game:
- You MUST pay off your credit card balances in full EVERY month. If you carry a balance, stop reading my blog, it’s not for you. The reason for this is that most rewards cards have high interest rates and the money you will pay in interest will offset any rewards you might be earning. You absolutely MUST have the discipline to pay off your credit cards every month.
- You MUST live within a budget. One of the reasons people like Dave Ramsey don’t like credit cards is because they believe you spend more then you normally would if you were paying with cash. There is some truth to this, but not if you’re living within a budget. Before jumping into the points game, set up a budget to live by!
- You MUST have a good credit history. If you have a score below 700 you will more than likely not get approved for most cards. Take care of your FICO score BEFORE you jump into this game, because a bad credit score can cost you much more money in the long run than the points you will accrue with credit cards. I highly recommend a free account at CreditKarma.com to monitor your credit score.
- You MUST be organized. You need to keep good records of when you signed up for cards, when you cancelled them, and when your payment is due. This is easy to do if you’re only carrying 1-2 cards, but once you start carrying 5+, organization is a MUST!
- You MUST to have some kind of plan for your points. Don’t blindly sign up for cards unless you have a plan for how to use the points. For instance, if you rarely fly Southwest Airlines, you probably don’t want to sign up for their credit card! You don’t need a detailed plan for how to use every single point, but don’t get stuck with too many, because like money, they tend to lose value over time.
- You MUST be aware of annual fees. In many cases, the rewards more then make up for the fees, but not always. Pay attention to whether a fee is waived in its first year. Don’t be afraid to cancel the card before a fee comes due. If in doubt, ask me!