Remember my post back in December explaining why you should never live on cash? Well, I like to present reason number one on why I don’t live on cash. Today, the mailman dropped off a letter. Inside the letter was a check from TD Visa for $1,408.23. The amount represents my “dividend” for 2008. My visa card gives me 1% cash back on anything I charge. Those who are good at math will be able to work out that in order to receive a $1,408.23 dividend, I would need to charge $140,823 to my Visa card in 2008. That brings up the question, what the hell did I buy?
What I charged to my Visa isn’t the point. The point is, had I paid for those purchases in cash, I wouldn’t have received the Visa dividend. While 1% doesn’t sound like much, over the course of a year, it can add up to a nice night out on the town. Now some people living on cash may say that if I flash cash, I could get a discount bigger than 1%. In cases where a merchant offers a cash discount, I take it and don’t use the Visa. For most merchants however, flashing cash won’t give you any more discount than flashing a Visa.
Whenever possible, I put every purchase I make on my credit card. It’s amazing the number of people I’ve met who tell me to live on cash because credit is bad. The only thing I have to say to them is they don’t know how to manage their money. If you’re the type of person who shops impulsively and doesn’t keep track of your spending, then a credit card is probably not for you. However, if you always live within your means and always pay off your credit balance in full every month, then a credit card is a great financial tool and one that will make you money.
A cash back or reward credit card doesn’t work if you don’t pay it off every month. The interest on the charges will more than kill off any rewards you can ever get. I’m happy to report that even though I’ve charged over $140,000 last year to my Visa, I was able to pay the balance off every month and incurred zero interest charges.
Now I just have to figure out what I’m going to do with this dividend check. Valentine is coming up so I may blow it on a nice romantic dinner date with the wife. It’ll be charged to the Visa of course.