Should I use a debit card or a credit card? What’s the difference between a debit card and a separate credit card?
but not from a straight white cis-man mansplaining/yelling at you on a Youtube channel 👀
Kidding, of course 🤪. Anyways, credit cards are an interesting and potentially fun space to play around with - there are so many options and at least in the U.S., the rewards can be rich.
First things first - why a credit card, I have a debit card!
Debit cards are likely the first ‘plastic’ you received, as you get one when you open a checking account. It works like a check, pulling money from your checking account - even if that money isn’t there (& then you get hit with an overdraft fee).
Because debit cards are linked to a checking account, they are extremely sensitive - imagine what could happen if someone gains access to it and somehow knows your PIN or can guess it - they have direct access to your checking account. It could also be added as a Venmo payment method, and again that money is coming directly from your checking account. Since it’s fraud, getting that money back isn’t impossible, but babes it’s going to take awhile, and it may not be in full. Do you have that kind of patience and time with other bills that may come due?
Debit cards also have some very inconvenient attributes at various merchant types.
Imagine you’re at a gas station and need a top up, that might cost $30. Well, with a debit card they’re going to put a temporary hold on your card for $75 - directly from your checking account, tying up your money.
Imagine you’re at a hotel and you’re staying for the weekend, the stay may be $400. Well, with a debit card they’re going to put a temporary hold on your card for $600 because in addition to the room rate they assume you’re going to have some incidentals - and again, directly from your checking account, tying up your money.
GG’s no-brainer: think of debit cards as a checkbook that gives you access to your checking account for cash - you don’t need to carry it everywhere you go. And if you have one on you, keep it secure. Don’t pay for stuff with it - you don’t know if your information may get compromised or stolen - keep your money safe.
Ok ok, so no debit cards, I get it. What now? Enter: the credit card.
You probably have at least one credit card, so I’ll keep this quick. Most credit cards give you a line of credit, let’s say $10k. You use it to pay at various businesses and then at the end of the month you get a bill, where you can pay it off in full (i.e. the statement balance) or pay something between the minimum due and the current balance (all the charges on your card, even after your statement closed).
Credit cards offer great convenience and protection. You don’t need to worry about your money being tied up because your bank is fronting the money. You also get a load of fraud protection, where fraudulent transactions are not your responsibility to pay, and you won’t have your money being tied up like a debit card.
Credit cards, in the U.S., offer great perks - in the form of points or cash back. If used responsibly, it’s a win-win-win.
Bamboozle alert
⚠️ Babes, credit cards only make sense if you pay them off in full each month. Credit card interest is extremely high, and buying things you can’t afford to pay off in full, will only become more expensive with the interest.
⚠️⚠️Many banks offer introductory point offers that will incentivize you to spend $x for y points or z cash back, and sometimes they require high spending thresholds to qualify. This is a tactic for you to run up a balance, and then pay interest on that higher amount - so be careful and make sure you can pay off every credit card in full each month.
🥰Go back to the basics where we talk how to structure your cash so you know exactly how much money you have after you pay off your credit cards
Creating your winning credit card strategy
This is going to sound a little philosophical but stay with me!
First things first, you have to think about the goals you have in the short/medium term. Write them out. Do you have a trip you want to go on? Do you have an upcoming honeymoon? Do you travel a lot for work, and you want an easy way to earn cash back on most of your purchases? I believe in ya, you know what you want to do.
The first easy decision is picking the lane of “points” cards or cash-back cards. Points mostly sets you up to travel, so if you want to travel, go with cards that earn you points - either directly at the airline or hotel group you want to fly, or with a bank that converts their points into these specific loyalty programs, like Amex Membership Rewards or Chase Ultimate Rewards.
If travel isn’t something on your priority list, go cash-back. This will ensure you get something for most of your purchases. There are many different ways this can happen, but it may be something like 2% on all purchases, 5% back on your top spending category and 1% back on everything else, etc. This is perfect for someone who doesn’t want to think about the point world and you can rest assured you’re getting some value out of your credit cards.
GG’s no-brainer: Pick a points card if you have travel aspirations, pick a cash-back card if you want to be rewarded for all of your everyday purchases.
I want a points card!
GG loves that for you.
What should I do? I’m overwhelmed! There are so many options!
Babes, it’s surprisingly uncomplicated and you can do it!
How an expert does it 😜
Step 1: Pick a major U.S. airline and global alliance
To make this a little easier, we’re going to take an example - let’s say you are getting married in 18 months and you’d like to take a honeymoon to Greece.
Getting to Greece requires you to take a flight - now look up all the airlines that get you there without stops (it’s your honeymoon and you don’t have time to connect, and your spouse can thank me later 😉). Let’s say you live near New York, you have 5 options, spanning across each of the major U.S. airlines (American, Delta, United).
This means the world is your oyster, you can choose basically any points card that earns American, Delta, or United points, or any card that allows you to transfer to their programs. American Express Membership Rewards points transfers directly to Delta, and other American or United partners. Chase Ultimate Rewards points transfers directly to United, and other American or Delta partners.
This is the more difficult position to be in, because for some this decision becomes immediately narrowed. For those who live in cities where there is one primary airline that dominates, don’t swim upstream babes, get into their ecosystem of loyalty.
GG’s no-brainer picks:
American Airlines
Charlotte
Dallas/Fort Worth
Miami
Philadelphia
Delta
Atlanta
Boston
Detroit
Minneapolis
Salt Lake City
Seattle (don’t yell at me, don’t align to Alaska unless you only a dometic babe)
United
Chicago
Denver
Houston
San Francisco
Washington, D.C.
Flexi flexi:
Los Angeles
New York
Each major U.S. airline also operates within a global airline allowance that extends the ability to use points on international carriers, opening up the world to you. American is a part of OneWorld which includes Alaska, British Airways, Cathay, Finnair, Iberia, Japan Airlines, Qantas, and others. Delta is a part of SkyTeam which includes Aeromexico, Air France, KLM, Korean Air, Virgin Atlantic, and others. United is a part of Star Alliance which includes ANA, Lufthansa, Singapore, Swiss, and others.
Step 2: Choose direct or indirect point earning card
Direct here means you go to American, Delta, or United and choose a credit card that earns you points for the things you already purchase. Each Airline has a partner bank with differing tiers of credit cards - do you want no fee, low/medium/high fee, do you want lounge access, etc. Babe you got this and I believe in you that you can make the best decision for yourself and your spending/travel habits.
Indirect means going with a bank’s own loyalty currency. Let’s focus on the big players here that have a direct connection to an airline partner, American Express and Chase. Amex Membership Rewards (MR) cards (Platinum, Gold, Green, Everyday) earn MR which can directly transfer to Delta and many other partners, including OneWorld and Star Alliance airlines. Chase Ultimate Rewards (UR) cards (Chase Sapphire Preferred and Reserve) earn UR which can directly transfer to United and many other partners, including OneWorld and SkyTeam airlines.
Step 3: Narrow it down
We’ve been really honing in on your next card that’s going to put in work for ya. What if you’re still lost? Well I got ya, babe.
Let’s go back to that Greece example, let’s say you live in New York (or Jersey, no shame) decided you want to go on United, and that you want a United credit card. Go search how many points you need to fly to Greece in your preferred cabin. You find it’s 100k points each way for each person. Babes, you need 400k points. Which cards offer you the most points? Which cards reward you the most for the categories you spend a lot in? You have 18 months to earn those points, and you can do it! Can your +1 (partner) get one too? You got this!
Disclaimer: Not Financial or Legal Advice
The content provided on this blog is intended for general informational and entertainment purposes only. It is not intended to be, and should not be construed as, financial or legal advice. The information presented on this blog may not be current, complete, or accurate.