How Owning Credit Card(s) in the United States is beneficial – Quantified!!!

On multiple occasions when I am at the restaurant, bar or in the queue at a grocery store or supermarket, I have seen people paying their bills with cash or Debit Cards. Many of my friends have also asked me, which Credit Cards should they go for, and what terms and conditions to be looked at while applying for one, and even doubting whether they should have a Credit Card as its form of debt. While researching online, I saw multiple blogs just giving a brief summary, but not quantifying the advantages. People have a general tendency to get convinced, once they see the actual savings in Dollar amount. Based on personal experience, I have jotted down the below pointers, that would make you think twice the next time about Credit Cards, considering what might be the monetary and non-monetary advantages.

1) 0% Introductory APR* (Savings: $1,725)

To understand the essence of this benefit, we would need to actually understand what an APR actually is. “An APR is an annual percentage rate of interest a credit card holder (i.e. you) would be charged on the balance if the full amount isn’t paid on or before the due date”. This is basically the price you pay for borrowing money. To include the benefit in the calculation, divide the APR% by 365 (the number of days in a year). Multiply the current balance, with the daily rate. That charge is then added to the balance and again multiplied by the daily rate, and so on.

Usually, Credit Cards in the United States, to have new customers, offer an introductory 0% APR for the first 12 months, and then the APR to be 13% to 25% depending on the credit score.

Let’s say, based on your credit score, you have been issued an American Express Blue Cash Everyday Card, with the condition that the APR is 0% for the first 12 months (can be more or less than 12 months) and 20% APR after that. If you don’t make a minimum payment or default on payment then the APR would shoot to penalty APR of 30% (which you don’t want).

These are other variables you were given when American Express Issued the card to you

  • Credit Limit – $10,000 (I would say, this is the amount you can borrow from the credit card, which would be the loan amount)
  • Bill Generated – 15th of every month
  • Due date – 30 days after the bill is generated
  • Minimum Payment – $25
  • Imagine you make a very big purchase of $10,000 on Day 1 and don’t use it for remainder of the period


So the savings/benefit with 0% APR can be approx. $1,725 over 12 month period (This is dependant on Credit Limit, Number of months APR is 0%, and future APR rate). Hence, it is wise to check the credit card you are applying has this benefit.

2) Introductory Cash back or Points Offer* (Savings $200)

Credit Card these days offer lucrative introductory offers, that you can get the benefit of from spending a particular amount of money in fixed amount of time.

  • The America Express Blue Cash Everyday Card – $100 Back spending $1,000 on purchases in the first three months of card membership
  • BankAmericaCard Travel Rewards – 20,000 bonus points, after spending $1,000 on purchases in the first three months of card membership. These 20,000 bonus points can be spent for $200 in statement credit toward travel purchases.

If you are thinking that spending $1,000 on purchases over 3 months can be difficult, then think again. You just got to stop making all the purchases from Cash or Debit Card. These days all the retail outlet have credit card machines, and you don’t have to pay even a single cent extra in processing fees for using your new credit card. I personally have used Cards for every transaction for the past 4 years, for me keeping cash is long gone.

On a weekly basis (5 business days), here are the list of my expenses

  • Lunch and Dinner – $15 every day – $75 per week
  • Coffee – $5 every day – $25 per week
  • Gas – $40 per week
  • Public Transit – $30 per week

This spending comes out to be $2,050 in 3 months. Not to mention I can use my cards for paying the bills for my Wi-Fi, Telephone (AT&T, Verizon, T-Mobile), Utilities, and Cable. You will also see that I am spending for my usual purchases, which I would have used Cash or debit cards.

3) Racking up Cash back/reward points the Smarter Way* (Savings $300)

I would say this is the benefit you get to see on the statement every month (tax-free). This is the major reason why I chose a particular Credit Card. 0% APR offer expires in 12 months, introductory Cash back is just one time, but this benefit is cyclic. It is also a good idea to categorize your spending and to see which category do you spend the most and the least. There are a variety of cards that give the most benefit for a particular category and apply for them accordingly. I use a portfolio of cards for different categories.

  • Chase Freedom, Discover it – 5% Cash back for categories every quarter. One-quarter is Gas and Public Transport; One is restaurant; One is home and holiday 
  • Costco Citi Card – 4% Cash back on Gasoline, 3% Cash back on Restaurants, and 2% Cash back on Costco purchases
  • American Express Blue – 3% Cash back on grocery stores and supermarkets.
  • Citi Double Cash MasterCard – 2% on all purchases

Say for a month the purchases I do

  • Restaurant – $350 using Costco Citi Card – $11 benefit
  • Coffee – $100 using Costco Citi Card – $3 benefit
  • Gas – $160 using Costco Citi Card – $6 benefit
  • Utilities (Wi-fi, electricity, Telephone) – $200 using Citi double MasterCard – $4 benefit

Monthly benefit – $25, and Annual benefit – $300

4) Temporary Offers rack up Cash back faster *

As per the Credit Card companies, these are the offers that the issuer say are tailored only for my account. These are limited time offers tat can be available to my account for promotional basis, The cash rewards are generally higher. The best Credit Card I have seen for such temporary offers is American Express. I have already got $50 benefit just for using my card to pay my Verizon phone bill


5) Making the payment in future (Savings $50)

This benefit directly relates to the concept of Time Value of Money. Suppose, I spent $1,000 on purchases on 16-Mar (assuming I don’t have 0% APR), with bill generated on 15-Apr, and due-date on 15-May. Now in order to not incur additional interest payment, we would need to pay this entire $1,000 to the Credit Card Issuer on or before the due date. This means that I have good 59 days more with me before I can make this post-dated payment, which means I can allocate this 1,000 in my savings or short-term investment account that can give me some rate of return on this $1,000 dollar. This benefit could be quantified to $8 for 59 days (Assuming 5% annual rate of return)

6) All the spending is documented and accounted for with proper categorization

All my transactions are in record books and can be easily tracked. I use additional apps on my iPhone like Mint and Prosper Daily to track my transactions. Which, would have been lost or forgotten if I was paying all my bills and expenses with cash. I now know where is my most spending, and where I need to control my spending (self-analysis)



7) Security & $0 Liability 

Everyone knows the pain when a wallet or a purse is stolen. Imagine you are having a wallet with $100 and 3 credit cards, and it gets stolen. Forget about getting back $100, but, rest assured, your cards are safe when you call the customer service and block them.

Another important pointer that is important is the $0 liability. In the past, I have been protected with this, and this feature has really impressed me. Back in Vegas during my convention, I lost my American Express Credit Card, upon calling the Card company, I learned that the person who stole my card made 3 purchases, but when they blocked my card, they made sure that those 3 purchases were refunded back to me. No questions asked, and they made sure that my card reached my hotel next morning to continue using the card. God, I love American Express, they really have the most satisfying customer service.

8) Other benefits – Rental Cars CDW, International Transaction Fees (Savings $1,000)

Not many people quantify these benefits, but this is another important aspect to my Credit Card selection. Very recently I made an airline booking on Lufthansa, to purchase a return air ticket for my parents for $1,500 using my Bank of America Travel Rewards Card. This card has 0% International Transaction fees, comparing to 3% that other credit cards usually have. The benefit was $45 on this purchase. My recent trip to Canada also forced me to use Bank of America Travel Rewards Card, where I saved $30 on international transaction fees.

When I travel and do car rentals in the United States. I book my car rentals through Hertz or Enterprise. We all know how expensive can a Collision Damage Waiver (CDW) insurance be for rental car companies. If we directly use rental car company’s insurance it’s about $20 a day. Allianz can provide the same CDW insurance for $7-9 a day. The Benefit of a 3-day rental can always be anywhere between $30 – $60.

9) Builds the credit score

*They are on rolling basis and are set as an example. They might not be available or different during the application.

This is article is for educational purposes only, and not any kind of advice. The Credit Cards mentions used in this article are based on personal examples. Suggestions are welcome


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