In 2017, after four aggressive years of payments and intentional lifestyle choices, my wife and I became debt free. Student loans, car payments, credit card bills, paid. It was the happiest day of our lives since the wedding.

It was a long four years between realizing our mutual objective, to be financially free from the burden of debt, and hitting that milestone. We became very creative grocery shoppers; we developed a weekly date night that didn’t involve spending any money; we even found this whole credit card points hobby of ours. Getting out from under the “normal” way of life, to live with debt, was a triumphant moment for us, and was the culmination of life lessons that we’ll keep with us for the rest of our lives.

I find that this is an important reflection to make as I continue to share my thoughts and ideas about credit card rewards with you. I want to clarify, and reaffirm, that everything I promote on my blog is a debt-free approach. You cannot win playing the points game if you have an unpaid balance sitting on your card at the end of it.

The Dangers of Debt

When I talk to groups about financial literacy, I always like to discuss the “elephant in the room,” debt. We all carry it! Or that’s what the banks would have you believe. In 2017, the year we escaped once and for all from the grasp of debt, the average American carried $16,000 on their credit cards.

Part of the reason for that is ridiculous marketing like the one below that banks send out encouraging you to run up a balance you can’t pay off because you’ve earned it. If you don’t have the cash saved for it, you haven’t earned it. They try to entice you with promotional 0% APR specials, but what they keep in the smaller print, is that your failure to pay the balance during the promotional rate will result in a 19.99% APR that not only starts immediately, but retroactively on any of the unpaid balance!!

Source: Kerrick Consulting – The Dangers of Debt

So why is that $16,000 a big deal? As you can see below, if we play out the promotion above where we carry a $16,000 balance beyond the promotional period, we accumulate more in interest over the next four years than we initially put on the credit card! That’s right, the balance at the end of Year 4 is over $33,000!

The Points Game

So what is this points game? By strategically using a credit card to earn bonuses and rewards on our budgeted expenses, while also avoiding the pitfalls such as carrying a balance or spending more than you can afford, you reap the benefits of a reward program without contributing to its funding source with interest payments.

Keys to Success

  1. Never spend money you don’t have. If you only have $100 to spend on dining this month, do not put more than $100 on that credit card while at the restaurant.
  2. Only spend money you would have normally spent. If you’re offered a great redemption on computer products that you wouldn’t normally have purchased, it is not a good deal to purchase those products.
  3. Strategically achieve sign up bonuses by acquiring cards before a large anticipated expense such as a wedding or car repair. When you have saved thousands of dollars for a large expense, strategically splitting that between credit cards may help you achieve thousands back in rewards!
  4. Always weigh the fees against the return of any transaction. Some of you may have the ability to pay your rent with a credit card for a fee. Calculate what the fees will cost you, relative to what you will receive in terms of rewards. If the fees are greater than the rewards, it’s not the right decision.

Tracking Your Results

As I’ve shared with you over the years, we earn a modest five-figure return from our strategic use of credit cards, all while remaining debt free. You can too! As you journey forward, use a spreadsheet or other tool to track the rewards you earn by card relative to the fees. Ensure, annually, that the cards you’re holding and using are offering you the best overall returns, and close the accounts that aren’t making a dent in your success.