There are some expenses that you just cannot avoid. You need to pay your utilities, phone bill, groceries, etc. These all can be paid on your credit card. These expenses are things that you would have paid by cash or some cash equivalent (e.g., check, money order, etc.) Instead, if you use a credit card to pay these expenses then immediately pay the credit card off, you have effectively given yourself a "discount" on your regular expenses as well in the form of a rebate.
However, this is something you should NOT do unless you have your spending under control. Please be warned that once you charge the above expenses on your credit card, you will be tempted to spend the money in your checking account for something else. In fact, that is why in my earlier post in this budget series I advised using actual cash separated into weekly or biweekly allotments for your allowance in order to help in "resetting" your financial default and keep your spending in line.
For those of you who have now reigned in your spending and are keeping within your budget, find a credit card that gives you the rewards that are the best fit for you.
For example, when our family was in the market to buy a new car, once we decided that we would be buying a GM car, I signed up for a GM credit card that gave us a generous percentage back on all of our eligible purchases in the form of a voucher for the purchase of a new GM car.
When I was planning our family trip (the trip to the Dominican Republic, see blog post Vacation Planning Strategies) I opened up a credit card that gave me a generous sign-up miles bonus (which jump started me on my goal of getting my 5 airplane tickets using miles. Then, all ran all of my purchases and expenses through that credit card until I achieved my goal.
Currently, my goal is to get "assistance" in paying for the hotel to the Dominican Republic. Through my vacation planning strategy, I secured 2 rooms at a 5 Star all-inclusive resort (including room service) with a kids club and $400 in hotel credits (for massages and such) for $2810 (total for 2 rooms, 5 people, and 9 days). To reduce this "hotel" bill, I have secured 2 credit cards from American Express, one that will give me $200 if I spend $1000 in eligible purchases in the first 3 months and it is with a 0% interest rate on the purchases for one year. The other promotion is a $300 statement credit if I spend $1000 in eligible purchases in the first 3 months and 0% interest rate for this purchase for 9 months. Also, the latter credit card gives me a premium 3% back in statement credit for all purchases made directly from a hotel.
When I reserved my hotel room, I only put down a deposit. There is still about $2000 that needs to be paid off. Thus, with the statement credit, if I pay off the balance owed on the card, I will get another $74.98 back. Thus, from the $2810, I have shaven off an additional $574.98 by using the credit card programs to raise money to help pay for the trip. In total, I am only spending $2235.02 for the hotel portion of this trip, and $0 for the plane tickets. (In the spirit of true disclosure: While the plane tickets are $0, I do have to pay taxes, fees, and government charges, which is still several hundreds of dollars).
Now, you will hear many nay sayers saying it is bad to open and close too many credit cards and that it will affect your credit. However, keep in mind that this is about planning. When I opened my GM credit card, it took us at least 1.5 to 2 years to spend enough for the car. Also, when I opened up my airline miles card, it took me about the same amount of time to save for the airplane tickets. Now, since it does take over a year (usually), you have to make sure you do not end up paying for this planning in the form of credit card membership fees. Most of the credit cards I have opened did not have any membership fees or the company waived the fees. I definitely take the fees into consideration. I chose to keep open my airline miles credit card because I need an open account in order to get the added perk of getting to check-in a bag for free. While there was a fee, the company's department that tries to talk people out of leaving (retention department perhaps) offered to waive the fees if I made $1000 in eligible purchases in the next 3 months.
Now, I do not know what your household expenses look like but for us, we easily spend $3000 per month on items such as groceries, gas bill, water bill, kid's various activities, restaurants, birthday gifts/special event gifts, etc.
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