All About Credit Cards and the Perfect Credit Card Spending Strategy

Credit cards get a bad rap – one that is not entirely deserved. I’ve got this working theory that it has to do with their name – the term ‘credit’ may mean ‘ability to obtain resources based on a future payoff’, but the card is named entirely wrong: If the only purpose of your credit cards is to purchase things on credit you are doing things completely wrong. The true beauty of credit cards is that they are a liquidity tool; credit cards allow you constant access to funding… whenever you need it.  So, let’s look at the perfect strategy for turning your credit cards into liquidity cards!

 About Credit Cards (Credit Cards Aren’t Evil but They Are Like Guns)

What exactly is liquidity?  Liquidity has multiple meanings, but in this case liquidity means ‘how quickly can something be converted to money’.  Your house may be worth more than the money in your wallet, but the dollar bills you carry are liquid while your house might take multiple months to sell.

A credit card has two main functions:

  • Credit Cards allow you to purchase goods and services today and allow you to pay for them later (the dangerous credit card strategy)
  • Credit Cards increase your liquidity by allowing you to spend money on days you do not collect a paycheck (the ideal credit card strategy)
Credit Cards are Like Guns.  And That's Okay.

Credit Cards are Like Guns (Dennis Jarvis)

Most people don’t collect a paycheck every day.  Most people also have a good idea how much money they make in a month.  If you are one of those people (and I imagine most of you are) you can use one simple strategy – pay for things on your credit card (preferably a rewards card), and pay the balance at the end of the month.  Think about it – it is much simpler to have a credit card (which by the way protects you from fraud, is easier to carry than cash, and, if you use a rewards card, even gives you rewards to use it) than to withdraw a huge amount of money at the beginning of each month, spending it down on each purchase.


The ‘credit’ part of credit cards is the dangerous part.  In that regard, credit cards are like guns.  Guns are also tools which are extremely controversial.  The downsides to guns are well known, but they can also be used for beneficial things like hunting and self-defense.  Just like the slogan, “guns kill” is disingenuous, so too is “credit cards cause debt”.  No – they don’t.  The tool’s user is responsible for the proper usage.  We all have many tools, but if I said “pencils write books” or “hammers build houses” you would demand that I stopped writing snarky articles for this site.  Only because credit card users have run up huge debts is this even an issue.

Summarizing the Perfect Credit Card Spending Strategy

  1. Use credit cards only as liquidity tools, ignoring the ‘credit’ feature
  2. Only spend what you know you can comfortably pay off at the end of the billing cycle
  3. Preferably use rewards cards, which will pay you to implement this credit card strategy

The Ultimate Credit Card Strategy

If you only ever use credit cards in this way, you will never have to worry what all the complaints about credit cards are about.  Think about it – you don’t have to worry about credit scores, you don’t have to strategize paying down your debts, and you don’t have to lobby Congress for laws with unintended consequences.  You also won’t have to worry about the security risk of carrying around a packed billfold.  Oh yeah, credit card companies will pay you if you implement this strategy with rewards cards.  Let the cash users be jealous!

So, readers, do you use this strategy?  What do you think about credit cards?  Would people look at you funny if you told them you have ‘liquidity cards‘?


  1. says

    People would totally look at me funny if I said I was using my “liquidity card,” but they do already, so maybe I’ll give it a shot.

    I DO use this strategy, but I’m a recovering financial advisor. I had clients that I couldn’t recommend this to in a million years because it was like handing the keys to a drunk. Using your “guy” analogy, they’d pull the trigger over and over just to make sure it still worked. 

    • says

      Agreed.  I also use this strategy in an attempt to fully exploit rewards potential.  But, like Joe, I have a background in financial advising, and there are few people that would be able to implement this strategy properly, despite how much sense it makes. 

      • says

        That’s the whole problem I think – it’s easy to point out mathematically how something like a debt snowball doesn’t ‘make sense’. However, neither does getting into debt in most cases. Psychologically, these concepts are pretty tough for some people.

    • says

      Luckily I’m just a random Engineer so I can toss out all sorts of weird terms! Liquidity cards don’t seem like something you would want in your pocket, however.

      I bet we could extend the analogy – running up against your credit limit is sort of like running out of ammunition? Thanks for stopping by!

  2. says

    I disagree. Your two cases are almost the same thing. Using credit card as liquidity is just a tiny step from using it as credit.
    – Only spend what you know you can comfortably pay off at the end of the billing cycle.
    Personally, I only spend what I have in my saving account. If I don’t have enough money in the saving account, then I don’t use the credit card until I do.

    • says

      Fair enough, but I don’t think our strategies are that far apart. Carrying the credit card for you is simpler than taking the money out of the savings account, for example. It increases liquidity since you don’t need to go home and put a few more dollars in your wallet every time you want to make a purchase.

      I tend to keep my checking account (used to pay the credit card bill) and savings (emergency, and when it gets too large investments) separate “And Never the Twain Shall Meet”. I think our strategies are pretty close, except I’m spending with the anticipation money will go into checking, while you are spending with the money already in savings.

      Fundamentally, I agree. Your method is safer than mine – especially considering the fleeting nature of jobs lately! Thanks for the input!

      • says

        I see – I tend to keep my checking account (used to pay the credit card bill)
        and savings (emergency, and when it gets too large investments) separate
        “And Never the Twain Shall Meet”.

        This explains it. I get your strategy now. 😉

  3. says

    My perfect c/c usage strategy is: don’t use it! From my personal experience people tend to overuse credit cards. I agree with RB40, if you do use it, use it only to the point that you can comfortably pay it off at the end of the month.

  4. says

    In India if you don’t pay back CC (or any type of loans), you will have goons on your front door the next day :) 

    We use credit cards for almost everything. I use it more for convenience (that is liquidity I guess) than for credit. I get all the benefits – warranty, purchase protection; I don’t have to carry cash and I get to see all my purchases in the same place. As a bonus, we get a nice $1000-$2000 at the end of the year. I will take it anyday over cash. 

    • says

      Sounds more like a loan shark than a credit card company!

      I agree – I put some of the benefits to good use. I use my Amex to rent cars since I added primary insurance to the card – easy to decline at the rental counter, and no claims to my auto insurance company. Win-win!

  5. says

    You pretty much described my exact strategy.  I use my Amex for everything, get the reward miles and use the benefits of the card (discounts on car rentals, and free rental insurance, etc) and pay it down every month.   My savings and investment contributions are automatically taken out of my bank account so whatever is left is all mine and free to spend.  I just pay the credit card down every month.   If I am concerned that I am spending too much I only have to compare what’s in my bank account with my credit card balance to see where I am for the month.  That’s it, nice and simple… 

    • says

      Do you go with the primary insurance on the Amex? I have a Blue Cash so I have to pay for the privilege… it’s like $17 per rental, but I don’t have to make my claim on my normal insurance. It came with insurance but it was secondary.

      Yeah, automating investments is the name of the game. Once I contributed to my first 401(k) I became obsessed with putting things on autopilot. I’ve got a pretty complex money assembly line going on, haha.

    • says

      Haha! You got me!

      I think I lost 1 engineer point for insinuating I would write a book with a pencil. Way too hard to convert my handwriting to pdf!

  6. says

    I use my credit card for every single purchase and pay it off in full each payday so my expenses match my cash flow. I love the rewards and ignore the ability to use it to buy what I can’t afford. I like your summary there. If everyone followed it, our economy would be in much better shape.

    • says

      Devil’s advocate: if everyone did it our way it wouldn’t be such a good deal as the terms would have to change… haha!

      I figure that if you can handle the urges to spend more, there is really no better way to buy things. Thanks for the comment!

      • says

        “handle the urges to spend more…” – that is the part that gets most people.  Being the data nerd that you are, you should know about the studies that prove that people spend more money when using plastic rather than with cash.

        Your strategy is great for people with discipline, but unfortunately they are the minority.  Most people who mess around with credit cards end up carrying unsecured debt with high interest rates and ridiculous payments for years on end.

        • says

          There’s always a catch, right? If you enact this strategy correctly you’ll be fine but the devil is in the details – and psychology seems to work against a lot of people when it comes to purchasing on credit.

          Uh-oh, have I pigeonholed myself as a data nerd? Haha!

          I was just trying to work around the studies (I linked to one in my response to Aloysa) by treating the cards as liquidity providers as opposed to credit providers. Most of the danger is in the ‘credit’ aspect of the card – if you have the discipline to stick to a strategy like this you won’t get into trouble. However, like the child who is told “don’t eat this candy now and you’ll get two later” thought, it might be easier said than done.

          Thanks for the comment, and I’m looking forward to your follow up to tomorrow’s post!

  7. says

    I use this strategy now.  It is much safer than carrying cash and you do have some protection with the credit card companies.  People blame the weapons, guns, credit cards, because it is easier to point the finger somewhere else rather than look at the person pulling the trigger or burying themselves in debt.  People need to take responsibility for their actions.

    • says


      I think you were just in my head a second ago. Back to the comment box: I hope the concept of personal responsibility doesn’t die. I know people often lament the death of society with every ‘scary’ statistic, but personal responsibility is definitely the key to a lot of the goodness of the so called “first world countries”. Bring it back in a big way, haha!

    • says

      Has your mother started to pay it off every cycle? Especially on rewards cards (higher APR) it’s a huge difference when you start to pay it off every month.

      It’s good that you’ve got the strategy down!