The KISS Credit Card Strategy

Chase Freedom Card reviewWith 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.

To keep it simple, just use one main card that fits your spending style. 

It is usually easy to redeem your reward points. You just log on to their reward site and you can apply the points toward your next statement.


KISS recapped

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.

  1. Don’t carry any balance
  2. Use cash for personal spending
  3. 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

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Joe started Retire by 40 in 2010 to figure out how to retire early. After 16 years of investing and saving, he achieved financial independence and retired at 38.

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56 thoughts on “The KISS Credit Card Strategy”

  1. Normally I would agree that it is prudent to use a credit card only in emergency and pay off the balance monthly. But…I purchased a Costco Amex card a few years ago and I kept noticing a $300-400 annual reward (cash equivalent) at the end of the year (that’s a $200-300 return after membership payment.)

    In examining our monthly budget recently I noticed our largest expenditure was groceries, so I purchased an Amex Blue Cash Preferred Card a few months ago and received $150 bonus payment to my account within 60 days plus a 6% return on grocery expense up to $6000 a year. I estimate we will make about $400 a year after the $75 annual fee. I just upgraded my Visa card and received a bonus reward of $100. So…I should earn about $1000 this year in reward and bonus payments from three credit cards. Obviously, it’s necessary to have automatic monthly balance payoffs so there are no penalties or losses.

    As a retired senior, I can honestly say that an extra $1000 makes a difference. Now I am looking at a Chase Sapphire Card (Travel Card) that would add an equivalent of a $400 bonus with 2:1 travel miles credit for each dollar spent. Theoretically, I could earn an extra $100 a month by using four credit cards and not using cash. So far, I have had excellent service from the credit card companies and never had a problem. Maybe…it’s time to rethink how we use credit cards for those who can pay the balance off monthly.

    • Great job! I’ll work on my credit card strategy this year too. Why not take advantage of the sign up bonus while we can.

  2. Our primary card is a Fidelity branded MasterCard. 2% cash into my daughter’s 529 college account. It just passed $16k in value, all from that cash back. It would be very cool if it covered a full year of college, 9 years from now. Even if it’s just a semester, that’s one bill I won’t have to pay.
    I still have a second card, an Amex offering 3% on gas (it started at 5%) and 5% for cell phonebill, office supplies, and some hotels.
    Early last year I grabbed an offer for a 10% cash back deal and used it to buy $50k in Visa debit cards. We used the cards over the year for regular spending, and since they cost $5 to load a$500 card, I netted $4500. That was about as crazy as it gets. The bank took down the offer two weeks into my adventure, but honored the deal for the 90 days in their ad.

    • The 2% into your 529 sounds great. I’ll have to look into that. Thanks for the tips!
      Buying debit cards like that scares me.

  3. I have continuous credit card debt for 10years in row.
    In 2003, I borrowed 10,000 from credit card @ 1.99% APR UNTIL PAID OFF
    No Transaction fee. Today, after 10 years, I still carry 4500 in balance.
    I dont know if this is good, but I feel comfortable paying 2% apr
    I make only minimum payments by automatic payment system.

    Please comment

    • Wow, that’s a long time to carry the debt. 2% is very good, but I probably would pay it off because I don’t like having credit card debt.
      How did you get that rate? It’s a great deal.

  4. There are 5 factors that affect your credit score (the below is FICO in particular). Having access to lots of credit and using it wisely is always your best option (and that includes a credit card). Doing this properly will give you access to the best borrowing rates and if you’re smart, you can leverage some of your credit to purchase asset backed securities that cash flow (for example you pay 3% to borrow and make an 8% return in a relatively liquid, yet asset-backed investment).

    -Payment History – 35% (don’t pay late)
    -Credit to Debt Ratio – 30% (have lots of credit but have the discipline to use no more than 20% of it at any given time)
    -Age of Open Credit Lines – 15% (don’t close old credit cards)
    -Frequency you apply for credit – 10%
    -Type of Credit in Use – 10% (you want to have at least 1 loan, line of credit, credit card)

  5. The barclay mastercard is a pretty good card, but one that is a little more specialized, but also really good is the Chase freedom visa. It has 1% cash back on all purchases, with a rotating 5% cash back on different categories like gas, groceries, and amazon. I like the fact that you can get more off of the extra bonus every few months, instead of only getting 1 or 2% back.

  6. We use credit cards as much as possible and pay off the full balance every month. I reckon that we earn at least £200 in cashback a year. Plus in the UK, you get extra protection when paying for goods and services costing more than £100. My Barclaycard Mastercard also gives me a free 12 month warranty extension on electrical goods costing more than £50.

    In my opinion, it’s about self discipline, you set a budget and you stick to it, whether you pay by cash or credit card isn’t that relevant.

    • We use the credit card when we buy online or something like electronics. Good point about the extra protection. We use cash for everyday items like food and coffee though. It’s easier for us.

  7. I utilize two cards – a Barclays Upromise card and a Marriott rewards card. The Upromise card builds up savings that we then transfer to 529 plans for our children and the Marriott card gets us free hotel rooms when we have pleasure travel.

    We never carry a balance and put most of our spending on one of these cards. Because we don’t carry a balance, I look at this as “free” money and have accumulated a few thousand dollars for my children’s education and free hotel stays on a bunch of different occasions.

    I find credit cards especially useful for charitable donations because I find it much easier to track than cash or check donations. You get an email receipt, I move that to a tax folder in my email account and then at tax time I just go through the folder.

  8. I disagree with your point about not using a credit card. Credit cards make it so easy to track your purchases.

    I shop with pre-made lists. That way I’m much less inclined to make impulse purchases at the grocery store. Even outside of grocery stores, almost everything that I buy is something that I planned on buying previously, rather than a spur of the moment thought.

    I do agree that you only need one good card. Maybe a second one as a backup that lives in a drawer and is rarely used.

    • I understand. Some people are good with credit cards. I’m better with a limited amount of cash. Once that’s gone, I won’t spend anymore. I know I spent a bit more when I put everything on a card. It just depend on the person.

  9. I have not heard of the Barclay credit card before. I personally shuffle through a few cards but yes it can be tough to keep track of the rewards.

  10. The first step we took towards financial freedom was to pay off our three credit cards. Then, my husband and I decided to use only one credit card at a time and pay off the balance at the end of the month. The credit cards are only used for large purchases, such as appliances, furniture, and the likes. We are enjoying the rewards we are receiving from our cards.

  11. If the average household has $16,000 in debt they should not be using a rewards card at all. The cost of the interest will outweigh any gain in the rewards.

    Rewards cards are great for transactions – people who pay the balance in full every month. But this represents a small minority of people. It makes great sense to use these cards instead of cash, but only as long as you pay no interest or late fees.

    Cash is definitely the simple solution for the majority that revolve a balance.

    • Great advice. If you can’t pay your balance in full every month, you really shouldn’t be using a credit card at all.

  12. I agree with 2 out of the 3. Don’t carry a balance….check. Use a rewards card….check. However, I don’t see the point of using a rewards card if you don’t use it as much as possible. 🙂

  13. Good post! Why is it that the simplest advice is often the best? We use cash for the most part ourselves as it helps us stay ore disciplined. We have two main cards that we use for more major purchases so we can earn some decent rewards. Our favorite type of rewards cards are travel ones as we love to travel.

  14. Great advice! Even though I want to say I would rather just spend cash, I also understand just how important a credit card is, since it makes it easy for us to buy some stuff but we should do our best to minimize its use and buy only the things we need.

  15. I think the cash vs. credit card is mostly a mindset issue. I use my credit card for almost all my purchases for several reasons. Probably the most important one is to help me keep tabs on what the heck I spent my money on last month. If I see that I’m getting a bit wayward on certain “luxuries” I will be much more vigilante in the future. I certainly agree with your advice to pay the balance in full each month, though!

  16. I prefer the don’t-get-a-credit-card strategy. It’s simple and I don’t have to worry about any balances at the end of the month. And it makes it easier to at least balance everything else-at least at the moment.

  17. I am making an effort to use all my credit cards as much as possible this year. I pay it off as I charge things and I don’t carry a balance.

    Amex gives me 2% cash back on gas purchases, Mastercard grocery points at my favourite grocery store and 1% cash back on my Visa.

    I have been letting a lot of free stuff get away from me by underusing my credit cards and one of my financial goals in 2013 is to get as much free stuff as I can. I should have enough grocery points, cash back and a Costco gift card to cover my expenses for one entire month early in 2014.

    • That’s good too. We just don’t spend enough money for it to make a big difference. We fill up less than once a month and our grocery store only takes cash/debit… Oh well…

  18. My husband and I only use credit card for all our expenses. Everything is either putting on the card or directly come out of automatic bank draft (e.g. Mortgage, IRA contribution). We hardly ever use cash. We never have credit card debts. I have a hard time keeping what I spent it on when I use cash. We love credit cards especially all the transactions are automatically downloaded to Mint. I can see easily my spending habit. We are probably just the opposite to many others; we are MORE cautious with our money when we use credit cards! Because I pay off our balance every month, I will closely monitor how much we spend and not keep putting things on there, or it will become a huge surprise when the bill is due and I don’t like surprises, especially the bad ones. I am sure most PF bloggers actually enjoy keeping track with their money (I am not a blogger but I go to Mint daily, sometime several times a day, to check all my balances!).

    • I used to do that too, but I found that we use less money when we switched to cash. It’s just easier to spend with a credit card.
      If it works for you, then that’s great. We all have to figure out our own ways to minimize expenses. 🙂

      • Mint is a free budgeting website. You can add all your accounts and keep track of them there. It’s a pretty good site if you need help with budgeting. Check it out at

  19. I hear so many people talk about interest rates when it comes to credit cards. I actually can’t even tell you what my interest rate is. Why? Because I pay it off each and every month. I pretty much only use my card when I’m traveling but usually pay off the bill WAY before it is due. I don’t really care about “floating” the bill out as far as I can, I’d rather be debt free all the time!

  20. Pingback: Weekly Round-Up: My Daughter’s Birthday | The Amateur Financier
  21. Good advice. However, I still find it advantageous to keep another card as alternative because some merchants have exclusive accommodations for just Visa or just Mastercard cards accepted.

  22. I use my Freedom card for about 90% of my credit card purchases. I wouldn’t want to spend the time juggling credit cards to maximize the cash back since I don’t spend enough for it to make a huge difference. I’m the opposite of you though, cash burns a hole in my pocket and it’s gone within a few days. Luckily with credit cards I don’t feel/act that way so that’s why I use cash for as few purchases as possible.

    • I leave my cash at home most of the time and usually only keep $20-$40 in my wallet. I see your point about cash burning a hole though.

  23. My husband and I ONLY use one rewards card; the only time I pull another card out of my wallet is every November, when I make one purchase on my American Express for Small Business Saturday – and that’s only to get the $25 statement credit!

  24. “It’s best to avoid taking on credit card debt from day one.”
    this advice is only good for the weak minded. many american probably belong to this category.
    credit card is a modern day convenience. it is foolish to spend more just because you have a credit card in your wallet.

  25. I agree, but it depends on the individual. I never use cash! I pay my entire balance every month on my credit card. Avoiding debt is focusing on your spending, not necessarily what you use (cash or credit). What prevents me from overspending is simple (too), I won’t pay those sky high interest rates. Perhaps a different perspective?

  26. By the way, I *completely* agree with the premise of this post.

    One of the most harmful suggestions I see in the PF blogging community is the relentless pursuit of special deals to get an extra 1% here, or $50 there. Your credit card example is a perfect one (though I’d take it further — frequent flier rewards are as bad or worse than most other reward programs. I’d dump those cards pronto!)

    What the bloggers fail to realize is that, for most of their audience, the extra rewards adds up to virtually nothing. If you have $50,000 in a savings account, the difference between 1% and 1.1% is $50 per year. Not. Worth. Chasing.

    Complexity in finances leads to peril. For those who don’t have much money, the gain from complexity is minimal. For those who have a lot of money, the gains are larger but so is the value of their free time. For both groups. simplicity is far preferable. Every ‘high interest savings account’ that you open is another 1099 to deal with at tax time, another company to chase after when they don’t send your 1099, additional paperwork to retain. Every credit card is another reward program to worry about. Another set of usernames and passwords to track. Another thing to annoy your wife. Not. Worth. It.

    I’ve been down that path. At my peak I had several high interest savings accounts, populated with $150,000 in money from interest-free credit card transfers, 4-5 credit cards with different reward programs… I would get stressed out when my wife would use the wrong credit card to buy gas, because that just cost us 1% in rewards!!!

    Not. Worth. It.

    Now we have Vanguard for our after-tax savings, a local bank for our checking, and a single reward card that gives us 2% back on everything, no limit, redeemable (almost) immediately. Life is much simpler and better. I am happier. My wife is happier.

    This is what I think PF bloggers should be preaching, but unfortunately there are no affiliate fees for closing credit cards and bank accounts!

  27. My KISS option? Don’t use a credit card in the first place. You don’t have to worry about payments then. Additionally, you can be able to use that money towards something like investments, savings, stocks, or another business venture. I guess that is just me.

    • It’s tough to avoid credit card completely these days, but if you can, that’s great. Do you buy items online? I guess you can use a debit card, but I don’t like that either.


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