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By Gabrielle Olya
When used responsibly, credit cards can be an invaluable tool to save money and gain access to exclusive perks — and high-net-worth individuals often know how to use credit cards to their full advantage.
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“I know one person with a seven-figure income who travels constantly, and uses her cards to save herself well over $10,000 per year,” said Lyle David Solomon, principal attorney at Oak View Law Group.
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So, what’s the secret to using credit cards like a rich person?
Pay Off Credit Cards in Full
Compared to lower-income earners, high-income earners are more likely to own a credit card but are less likely to have a balance on their credit cards. According to the most recent data from the Federal Reserve, 98% of Americans with a family income of $100,000 or more hold a credit card, but only 38% of credit cardholders in this income range carried a balance at least once during the last 12 months.
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Among those with a family income of $25,000-$49,999, 60% of credit cardholders carried a balance at least once during the last 12 months, and among those with a family income of $50,000-$99,999, 52% of credit cardholders carried a balance at least once during the last 12 months.
See: Why It’s Still Better To Use Your Credit Card Over Your Debit Card
Paying credit card balances in full every month allows the rich to reap all of the rewards of credit card ownership without any of the drawbacks, like having to pay back interest and/or winding up with debt.
Have Fewer Credit Cards
Tom Corley, author of the book “Rich Habits: The Daily Habits of Successful People,” found that only 8% of rich people used more than one card, while 77% of poor people did, Credit.com reported.
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The advantages of this are two-fold: first, it’s easier to keep track of your spending, and second, you’ll rack up rewards faster when you put all of your spending power into just one or two cards.
Take Advantage of Sign-Up Bonuses
Solomon said his wealthy client has a whopping 27 credit cards. Although this is not the norm for rich credit card users, it is likely how she is able to save so much on travel — the more credit card accounts she opens, the more sign-up bonuses she is able to take advantage of.
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Sign-up bonuses can lead to substantial savings, especially on travel. For example, with the Chase United Quest card, you earn 80,000 bonus miles after you spend $5,000 on purchases in the first three months, and an additional 20,000 bonus miles after you spend $10,000 total on purchases in the first six months. If you earn the maximum bonus miles, they have a $1,000 value. And with the American Express Platinum Credit Card, you can earn 125,000 membership rewards points after you spend $6,000 on purchases in the first six months — a value of $1,250.
Don’t Shy Away From Cards With Annual Fees
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Rich people know that they can make up annual fees in perks and bonuses which is why they’re often willing to shell out big bucks upfront. The American Express Centurion Card — the most exclusive credit card available — requires a $10,000 initial fee to activate your card and a $5,000 annual maintenance fee. But the perks make it worth it to the high-income earners that can afford it — they include an Equinox all-access gym membership, a Saks Fifth Avenue credit of $1,000 each year, Hertz Platinum status and Hilton Diamond status.
