So the question that we’re addressing today is:
How does one meet credit card spending requirements?
And happily there are a lot of ways of doing this.
The fundamental point of this lesson is: Your goal should be to spend every dollar by credit card.
And of course pay the cards off on time and in full every single month.
1. Shifting every possible payment to your credit cards
This is the low hanging fruit.
There are many bills that you can pay with a credit card such as utilities, phone/cable, school tuition. Assuming of course that you do not carry any balance on your credit cards, this is always a wise move.
There is simply no reason to pay with cash/check when you can just as easily pay with credit card.
In my book, paying with cash/check/debit card is akin to throwing away free money.
2. Prepaying your bills
The idea here is to pay now for what you know you will have to pay later. And there are many examples of how to do this:
- Prepay your insurance for the next year with a credit card.
- Prepay for recurring expenses (like toilet paper, lightbulbs, etc.) by purchasing Amazon gift cards with your credit card and signing up for recurring deliveries.
The advantages of such this approach:
- You are not increasing your spending at all, you’re simply moving your spending forward.
- Sometimes you can save money with such an approach by avoiding the financing charges associated with monthly payments, or by getting discounts with Amazon grouped orders.
The chief disadvantage of this approach is that it requires extra money upfront. This is not feasible for people who are living paycheck to paycheck.
3. Paying reimbursable business expenses with your credit card
This is not an option for everyone. But if your job allows you to purchase continuing education, travel, or business expenses on your credit card, for later reimbursement, that is an excellent opportunity to put some “spend” on your credit card which will not otherwise affect your bottom line.
Other maneuvers along this line include offering to pay for vacation reservations, restaurant tabs, or common expenses for you and your friends and then getting reimbursed.
Like we said at the start, the goal is to pay every expense you can with a credit card. The cost of purchasing with credit cards is already baked in to the price of any item you buy, so if you don’t purchase items with credit cards, you’re actually paying for other people’s benefits.
And credit card bonuses are so lucrative these days, that merely making these minor adjustments will open up some serious free travel opportunities.
4. Use a third party service to pay your rent or mortgage (for a fee.)
One of the problems with using credit cards to pay for everything is that there are some things that you simply can not buy with a credit card. Mortgage payments, loan payments, and rent come to mind as major expenses for all of us that generally can not be financed by credit card.
Fortunately there are some third party services that will allow you to pay such bills by credit card. (the details change on this too frequently for us to recommend a service, so please Google this when you’re going through the course!)
Is this a good idea? Not generally as the fees are simply too high. But in some instances it may worthwhile to use these services sparingly be if they opens up the opportunity to hit a lucrative spending bonus that you otherwise wouldn’t have been able to achieve.
Brad Note:
We put essentially every single dollar we spend in life on our credit cards (groceries, gas, etc.) and it’s more than enough to hit the spending requirements on a few cards each year.
Just to hypothetically play out some numbers here:
Let’s say we opened 5 new cards over some period of time. Each has a 50,000 point bonus with a required $3,000 minimum spend per card. For our normal $15,000 of spending we would earn 250,000 points/miles. At our 2 cents per point rough valuation per point, this is worth $5,000 of (tax free) travel.
That’s essentially a 33% rebate on our $15k of normal spending!
That is with zero effort whatsoever — just being smart about what tool we use to pay for our normal expenses.
One thing we personally don’t do is put our monthly automated payments (cable, internet, electric, etc.) on a new card every time we open a new account. Though of course we do put these expenses on an existing credit card to earn points generally — and if we can get a bonus category out of that spending all the better.
Keeping with our theme of simplicity, it is too much effort for us to change the auto-pay options every month for too little benefit. Since we do spend enough to hit the requirements without these added expenses, it just becomes a needless hassle. If we were ever in danger of missing that spending limit, we’d of course do everything possible to make it happen. You don’t EVER want to miss a bonus on a newly opened card.
Action Steps:
- Take a look at your spending habits and determine how much you can spend per month on a credit card. This is important to know to make certain you can hit the minimum spending requirements on your newly opened credit cards. (Most would require you to spend about $1,000 per month, though a card with a $5,000 minimum spend in the first 3 months would need nearly $1,700 per month for instance)
- Look at your financial life and see what you currently pay for with cash, check or a debit card. Is it possible to put any of this spending on a credit card?