Credit cards are the most misunderstood pieces of plastic in the world.
Most people simply don’t know how to use them correctly, and end up doing what the banks want them to do – accumulate debt and pay interest for the rest of their lives.
If you haven’t figured it out yet, the system is designed to fuck you over. The government and corporations don’t want you to succeed, they want to keep you enslaved.
I assume you don’t want to be a slave, so this article will explain how to use credit cards to your advantage.
If you want to get ahead in life, it is absolutely essential that you learn how to leverage this financial instrument.
DISCLAIMER: I am not a financial professional and any advice written here is given through my own personal experience. Do your own research and speak to a financial professional before you make any major life decisions.
Establishing Credit
In order to beat the system, you have to start establishing credit – a lot of it.
To start, join one of the four major US banks: Bank of America, Citi, Chase, or Wells Fargo.
Joining a big bank is imperative because they have the most money and the most members, meaning that they carry less of a risk and can provide you with more credit.
After you pick a bank, open a checking account with a credit card associated with it. If you have no or bad credit history, they’ll probably start you off with a credit limit between $500-$2,500.
Now the important part, is that you have to start spending money on it.
There is no point in using a debit card anymore, so start paying all of your expenses with your credit card. You’ll have 2 weeks before your transactions are posted, and then 30 days to pay it off, essentially giving you a 45 day loan with 0 interest.
*Important* – You have to pay the full amount back within the payment date, or then extremely high interest rates will start kicking in. Never let that happen!
Start a Capital Intensive Business
Now, most people don’t have personal expenses that are high enough to start showing the banks that they need more credit.
In order to increase your credit score and credit limit, it is pretty much necessary to start some sort of business.
It is also good to start a business that is capital intensive, so that you’ll have a lot of expenses to put on your card.
I’m bias towards ecommerce because that’s how I raised my credit, but any business where you have Advertising and/or Inventory expenses is a good choice.
*Important* – Don’t just start a random business thinking it’s going to be easy. It will likely be the hardest thing you’ve ever done, so give a lot of thought on whether this path is for you. You are not guaranteed anything, and there is a high level of risk involved.
Raising Your Credit Limit
When you first start a business, you’re probably not going to be making a profit. That’s okay though, because as long as you are at least breaking even (or maybe even losing a little bit of money at first), then you’ll have enough money to pay off your credit card balance every time it’s due.
And after a few months, your bank will usually give you an option online to request a credit line increase.
Whenever you get that option, you want to click that button and fill out the form. You have to request a dollar amount to increase your limit to, so what I usually do is request to double my previous credit limit.
After you submit the form, one of three things will happen – Your request will be instantly approved, you’ll be approved but for a lower credit limit than you requested, or your request will be put under manual review by a credit specialist.
Furthermore, if your credit limit isn’t going up as fast as you’d like it to, you can start getting additional credit cards.
I got my first credit card in October 2015 with a $1,500 limit, and then a second card a few months later. A few months after that, I got the same 2 cards again, giving me a total of 4 credit cards.
I rotated my expenses between the four cards, and increased the limits every chance I got.
In Spring 2017, all my credit line requests were getting denied, the first time I was really getting any pushback. I had built my total credit up to $65,000, but I wanted much more.
My bank told me that if I open a business checking account, they can add more credit cards under that account.
So I came back to the US and opened my new account, giving me 2 more cards and an additional $15,000 in credit.
During this US trip, I learned that your bank will help you a lot more if you go into the branch and tell them what you’re trying to accomplish. It’s also good to get a contact at the bank who can help you in the future.
Anyway, moral of the story, in a year and a half I went from zero credit history to a total credit line of $80,000.
The Power Of Credit Cards
While you’re building your credit, it’s equally important to know the reason why you’re doing this.
And contrary to all the broke travel bloggers, it’s not about the 2% reward points.
You are building your credit so that you have access to free capital.
I spend anywhere from $5,000-$10,000 a day on my cards, money that I wouldn’t be comfortable spending directly from my bank account.
It’s crucial to have that 45 day float, as it allows you to make better business decisions without worrying about your own money at play.
And with that available capital, I’m able to always be reinvesting it into other opportunities.
The more money you have, the easier it is to make more money. That’s why the rich get richer and the poor get poorer.
You just got to choose which side you want to be on.
Final Thoughts
Alright guys, that’s it for tonight.
I hope that you now better understand how to use credit cards, and why they are so important to take advantage of.
Without credit cards, I wouldn’t be anywhere near the position I’m in now.
And when you’re in competition with thousands of other people trying to break free from the shackles, the leverage that credit cards give you is absolutely necessary to play the game.
Drop me a comment with any thoughts or questions, and be sure to vote in the poll below.
Back to Thailand! – Brian