4 Credit Card Strategies the Wealthy Use That Work for Everyone
-
Written by
Andrew Lisa
-
Edited by
Levi Leidy
-
Reviewed by
Jasmin Baron
The rich (or at least, the professionals who handle their finances) know a thing or two about money management. The savviest among them view credit cards as tools that can make life cheaper and boost their lifestyles without increasing their spending.
Wealthy cardholders rely on the following strategies to get the most out of their credit cards. What many don’t realize is that these strategies are available to everyone across the income spectrum, even if they utilize them on a smaller scale.
They Weigh Each Card’s Fee Against Its Rewards Value
Average earners might be shocked by the fees that the most prestigious high-end credit cards charge. Some cost close to $700 per year, which could be considered very steep. But the most exclusive cards are invitation-only, with thousands in annual fees plus five-figure initiation fees.
However, those cards can pay for themselves several times over with the lucrative rewards they deliver, including juicy welcome bonuses, elevated cash back, higher points and valuable freebies and upgrades — but only for cardholders who understand the terms, meet the requirements and use their cards responsibly.
Average earners should adopt precisely the same mindset.
The formula is the same for the monied class and the working class alike: If the dollar amount of the rewards value is greater than the annual fee, then the bank is paying you, and the card might be worth the expense.
Example: A more attainable card with a comparatively low annual fee of $95 might offer 6% cash back on groceries. If the cardholder plans to spend at least $1,584 per year on groceries — a fairly modest $132 per month — then the card has paid for itself, and the bank starts paying the cardholder.
They Use Multiple Cards Strategically
Recent studies have shown that millionaires are more likely than those with sub-$1 million net worths to own more than one credit card, but many average earners can benefit from multi-card strategies just as easily.
Those who can put in the extra effort and manage the added responsibility of owning more than one card might:
- Use a card that pays bonus points or cash for a handful of higher-spending categories and a flat-rate cash-back credit card to harvest better rates for everyday purchases.
- Use multiple rotating category cards that change their bonus spending categories quarterly to earn maximum rewards all year long.
- Utilize a travel credit card only until they earn enough points or miles to book a planned flight or hotel stay through that card’s loyalty program, then switch to a category card that pays more for other spending categories.
They Prioritize Rewards Over Interest Rates
Cardholders with a seven-figure net worth or more are also more likely to focus on the rewards they can earn, rather than the credit card interest they might pay. A look at the numbers makes it easy to understand why.
As of June 30, most cards charge effective annual percentage rates (APRs) in the mid-to-low 20% range. However, historical data from the St. Louis Fed shows that the average APR never once dipped below double digits during the last three decades, even when APRs were at their lowest. That means that revolving balances with daily compounding interest are debt traps even during the best of times.
Of course, 18% is better than 26% — but they’re both financial meat grinders.
The rich are less concerned with those numbers because those who pay their statement balances in full every month don’t incur finance charges, which is why not carrying a revolving balance is an essential element of sound credit health, no matter your income or net worth.
Synopsis: Live rich by never charging more than you have the cash to cover in a single month, so that your APR will always be zero.
They Leverage Perks To Travel Above Their Weight
Whether you’re a millionaire tycoon jet-setting to luxury destinations in first-class accommodations or a wage-earner hoping to give your family the best vacation you can afford, it’s all about choosing the travel card that’s most likely to give you more vacation than you could afford to pay for out of pocket.
For example, the wealthy might use cards with annual fees approaching or even exceeding $1,000 to earn the richest rewards, including:
- First-class flight upgrades
- Premium hotel and resort upgrades
- Access to the most exclusive airport lounges
- Annual travel credits that, by themselves, can offset or even negate the annual fee
- Instant elevation to elite cardholder status
- Top-tier concierge and travel planning services
However, some cards with far more accessible sub-$100 fees offer remarkably similar credit card perks, even if they’re not quite as juicy. Examples include $50 annual hotel credits instead of $200, $120 in DoorDash credits instead of $300 and Hertz Five-Star status instead of Hertz Platinum status.
