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Archive: Avoiding Credit Card Pitfalls
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A. Watch the following video & try not to get too scared (I disagree with his idea that it's virtually impossible to beat the credit card system but it's good to know why he is so scared of it & he has some good points), & see the 2 primary pitfalls of credit cards that most people fall prey to (overspending & interest). Also read his "Total Money Makeover" which has tons of excellent principles even if you use non-interest bearing credit cards (effectively since you should almost never carry a balance when interest is in the equation with rare exceptions like a mortgage and low-interest student loans) with systems in place to minimize the negatives he mentions. Apply principles from that book like an emergency fund, the debt snowball, & an emergency fund (the first 3 of his "baby steps").


One exception from the baby steps that Dave would disagree with me about that I think is wise is investing the max amount your company matches if you get a retirement fund match from your company even if you are currently in debt as long as the interest isn't over 20% on any debt you carry & the match is at least 50%. I agree with him though about buying cars in cash, and whether spending $600 (for older reliable models with low miles & especially if low miles per gallon - I once bought a >20 yr old $600 Nissan Maxima with <130,000 miles) on a car or $75k on a car (someone in my immediate family bought a new Porsche SUV in $ even though I wouldn't recommend it due to depreciation, but at least they did it in $) suggest doing that. 

A good analogy to credit card spending is alcohol, except a much higher percentage of people overspend & carry interest incurring balances than are alcoholics. Just like it's important as someone who drinks alcohol to "know your limit", it's important as a credit card user to know what it takes to avoid the most common pitfalls of credit cards that plague so many people. Those issues can be even more dangerous than alcohol in some cases, leading to bankruptcy, divorce, and even suicide.


It's critical to approach credit cards with caution while seeing the high-value potential that is present with them. Credit card points paid for the majority of expenses for my Disney engagement (flights, her hotel, theme park admission, & most meals), honeymoon (including 3/4 1st class flights to Vail & 12 nights at the Marriott Mountain Resort finishing just 2 days before Christmas), 1st year anniversary with a 6 night stay at the Ritz Carlton New York Central Park with club lounge access, or 2nd year trip with 5 nights at the Grand Hyatt Tampa with club lounge access.

B. Develop excellent budgeting strategies, including signing up for and developing budgets on fluctuating expenses and connecting it to all of your credit card accounts.

C. For fixed regular expenses, if you get paid on a regular basis (i.e. not strictly commission-based), I recommend having bills like mortgage, utilities (& since these can fluctuate, keeping extra savings in this account), regular donations (i.e. tithe if you do that), etc. automatically transferred out of your primary checking account (free transfers only & if you don't have a checking account with it such as some Bank of America accounts that charge, get one)

D. Since is no longer an option, I recommend manually paying off any credit card with a decent size balance in full right after paying off fixed regular expenses in addition to having credit cards set up to automatically pay in full every month.

E. If you're not ready to take some serious steps towards minimizing the negative factors that Dave mentions, you might consider alternative strategies toward maximizing your travel such as some of the $ opportunities on the FB page. For instance, you could still get some great cashback debit cards, a bank that earns AA miles instead of interest, buy points on sale such as during the Daily Getaways for points priced below TPG valuations after comparing them yourself since not all Daily Getaways Points are priced below his valuations, & apply them toward travel, etc. The miles based debit card options are ones I do not recommend. If you don't take steps such as above (although you could take a different route entirely, it's just important that you do some sort of effective system for minimizing those 2 big negatives), the value of credit cards will likely be more negative than positive.

F.  Additional Important steps prior to credit card applications

G. Get a Free Credit Card Consultation. Most often whatever you think is going to be your best card even after hrs of research, isn't. In my early years of credit cards, despite hours of research, I did not get the best cards possible. 

H. Do an annual fee review each year for any cards where positive expected value is questionable for you. If a card isn't regularly producing positive expected value and you aren't going to change that, look into options for downgrading or upgrading the card (i.e. to no annual fee variant) where you would have positive expected value. A no annual fee card that is barely used to just keep it alive is better than a cancellation when a no annual fee variety is available. Sometimes cards change for the better over time and it's better for credit to keep cards alive. Be sure to check with reconsiderations as well for how the company might be able to keep you as a customer, such as through a $ credit that they will give you or a spending amount they will give you for a custom made bonus for you.

I. Manage your expiring credits, certificates, and points with a website like Awardwallet

J. Manage which best cards you have to certain expenses using Walletflo.

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