With the average American household owing nearly $16,000 in credit card debt, I think we can all benefit from the KISS credit card strategy. If you are an engineer, I’m sure you know about the KISS principle. This principle states that most systems work best if they are kept simple rather than made complex. KISS = Keep It Simple! Here is my KISS credit card strategy. It may not be optimal, but it is simple and easy to carry out.
Don’t carry a balance
The first and most important point is to eliminate credit card debt. If you carry any credit card debt at all, it is imperative to pay it off ASAP. The average American household above can make the $400 minimum payment every month and it will take 62 months to pay off that $16,000 credit card debt (@18% interest rate.) 5 years is a long time to be in debt and it’s not a good feeling. However, by doubling the payment to $800/month, the debt will be paid off in 24 months. Paying off credit card debt is a huge undertaking and that’s why many families just pay the minimal and carry the balance forward.
It’s best to avoid taking on credit card debt from day one. I was fortunate enough to avoid credit card debt when I first started working and never had to deal with outrageous interest rates.
Minimize Credit Card Usage
I have been using credit cards since my first year of college in 1990 and only during the last 5 years, we went back to mostly cash instead. This might not be true for everyone, but I know that I use less money overall if I spend cash instead of swiping a credit card. Cash feels more real to me and I only have $75 per week to spend. Once I’m out of cash, I’ll have to wait until next week to spend more money. The cash allowance system put a cap on my day to day spending.
I still use my credit card, but it’s reserved for household spending like gasoline, plane tickets, and home repair projects. I use my cash allowance for personal spending like eating out, groceries, and clothing. Groceries really should be in the household spending category, but WinCo only takes cash so we just increase our allowance to compensate for the grocery spending.
Use one good reward card
This is a point of contention among personal finance bloggers. Many bloggers like to maximize rewards by using a bunch of different credit cards. One card might give 6% cash back on groceries. Another card can give 5% on gasoline. Personally, this is way too much to keep track of. I like to keep it simple and just use one credit card for most purchases. The Barclay Rewards Mastercard gives at least 1% cash back on every purchase and 2% on gas, groceries, and utilities. I like that I don’t have to consult a spreadsheet before paying for dinner.
To keep it simple, just use one main card that fits your spending style. The Barclay Rewards Mastercard is a good choice because of the simple cash back reward and $0 annual fee. Here are the details of the Barclay Rewards Mastercard.
- Sign Up Bonus: 5,000 points which can be redeemed for $50.
- Unlimited 1 point per $1 on any purchase. (1%)
- 2 points per $1 spent on gas, groceries, and utilities. (2%)
- NO annual fee.
- 0% Intro APR for 15 months on purchases and balance transfers
It is easy to redeem your reward points. You just log on to their reward site and you can apply the points toward your next statement. Alternatively, you can ask them to issue a check.
We all have a bunch of things to worry about already, so why create more stress by complicating our credit card strategy? Some people like to increase rewards or mileage by using tricks like buying gift cards or other cash equivalent products with a credit card, but this is too complicated for me. I’d rather keep it simple and concentrate on spending less. If you stick with these 3 steps, you won’t have to worry about credit card bills either.
- Don’t carry any balance
- Use cash for personal spending
- Use one good reward card
What do you think? Do you spend a lot of time shuffling between multiple credit cards?
photo credit: flickr Jimee, Jackie, Tom & Asha’s photostream