ACCOUNTANT EXPLAINS: How To Use a Credit Card Properly in 2026 (Beginner’s Guide To Free Money)

[00:00] In this video, I'm going to show you how to use a credit card properly so you can earn free money. And to do this, I'll give you five rules you need to follow to get the most value out of a credit card. Let's get straight into it. The first rule to follow is never pay any interest. Now I repeat, never pay any interest.

[00:13] This is by far the most important rule. If you cannot follow this rule, then you've already lost a game. So if you cannot do this, then you shouldn't have a credit card. End of story. Now I've been using credit cards for over 10 years now and I've enjoyed all the good perks without ever paying a cent in interest.

[00:26] And the best way to never pay any interest is to always pay your credit card balance in full every month. I repeat, in full, not the minimum amount but in full. Some people see the minimum amount option and think they've been clever paying the smaller amount. What they don't realise is the remaining amount owing becomes credit card debt.

[00:40] And with high interest, this debt can snowball to uncontrollable amounts very quickly. This is because credit cards charge insane amounts of interest anywhere from 15 to 25%. This is how they are able to offer so many great perks because they know there will be a percentage of people who won't be able to pay back the balance in full

[00:55] and will end up in credit card debt. During the filming of this video, Australians are currently $18 billion in credit card debt and I don't want you to join them. So please, please, please do not let this happen to you. Always pay off the balance in full. The first thing I do when I receive a new credit card is to set up an automatic direct debit for the full amount to be paid from a bank account every month

[01:12] so there is no chance that I forget to pay. Of course, the credit card companies will make it a bit hard for you to do this. You need to go on their website, print out a form, sign it off and post it to the company. And make sure you remember to take pay full balance, not the minimum amount.

[01:24] Most of the credit card companies don't allow you to simply add direct debit from within the app or online account. And they do this for a reason, so make sure you beat them at their own game. And if you are one of those people in credit card debt, then please focus on paying that off first before you do any investing or saving or anything else.

[01:38] Credit card debt should be your main priority because getting rid of that is guaranteed 15 to 25% return. I mean, to put that into context, the stock market returns around 10% per year on average over the long term. So you are pretty much doubling that by paying off your credit card debt.

[01:50] It's an easy choice. I think credit card debt is so normalized in our consumer society that most people don't realize how much it's holding them back financially. And if you need to hear this from a stranger on the internet to get your act together, then I will gladly be that guy. Because you know what, I want all of you to do well and achieve financial freedom.

[02:05] All right, the next rule to follow is to treat your credit card like it's your own cash. Always remember, your credit card limit is not free money. You'll have to pay it off eventually. So never think of your credit limit as extra money. This is a short way to go into credit card debt.

[02:17] What I would recommend is you treat your credit card like it's a debit card. Use the card for your needs, not once. Only make purchases that you are going to buy anyway, which you can pay back and fall with cash in your bank account. If you can't afford it right now, then chances are you won't be able to afford it in a month's time.

[02:29] So I don't want to see you using a credit card as a stopgap before your next paycheck comes in, unless it's a real emergency. If you're paying something with your card, then you need to have cash in the bank ready to pay it off straight away. You need to pick your battles in life, and sometimes if you know deep down, you don't have the willpower to not overspend, then please do not get a credit card.

[02:45] Some people are not able to mentally separate credit and actual cash, so it's best they don't get a credit card. But chances are if you're watching a video like this, then you are probably a responsible financially savvy person, and you should be able to follow this rule. And if that's the case, then a credit card can be a great tool for you.

[02:58] Also, just because you're going to afford it doesn't mean you need it. For example, say you bought a pair of shoes, which is originally $100, but discounted at $50, you might be thinking that you saved $50. Well, that depends. If you actually needed some shoes for say work, then yes, you did save $50.

[03:11] However, if you already have 20 pairs of shoes at home, then it means you lost $50. It's important to have this mentality, especially when you're using a credit card. Some people justify spending on their credit card because they say they want to earn the reward points. And while yes, that's true, chasing points can be a good strategy if you're buying things you actually need.

[03:27] But if you're buying just for the sake of reward points, then you're actually losing money. So again, the lesson here is to treat your credit card like it's cash and only use it by needs and not once. Alright, so now that we've talked about two defensive rules, it's time to go on the offense. Because the next rule to follow is to take advantage of the reward points to earn free money.

[03:42] This is my favorite perk about a credit card, the reward points. There are two ways to earn reward points. One, through a sign-up bonus and two, by spending money on the card dollar for dollar. I usually like to target credit cards with large sign-up bonuses because you'll receive free money for spending money you'll have spent anyway.

[03:58] The most popular type of sign-up bonus deal is to receive $100,000 bonus points by spending $3,000 within 90 days. Some cards will come with a free first year annual fee or they may charge a reduced second year fee. You can always cancel the card before the second year so you don't have to pay the annual fee.

[04:11] Personally, I don't like to pay annual fees for credit cards. The reward points can be used to book flights by electronic items or receive good cards. For example, a credit card may offer $100,000 bonus points if you spend $3,000 in the next three months with zero annual fees for the first year.

[04:24] If you can spend that $3,000 in time, then you can use the $100,000 points to redeem flights or seat upgrades or use the points to buy various items on the corner store. You can even exchange the points for gift cards at popular stores in Australia.

[04:36] But I've read that flight upgrades are the best bang for your buck in terms of value for points. But personally, flight upgrades aren't that valuable to me. So most of the time, I opt to convert the points into supermarket gift cards like calls or wars. Because to me, a $500 wars gift card is basically $500 in cash.

[04:50] I'll always need a shop for groceries, whereas a flight upgrade is a luxury I can live without. But it all depends on you and how you want to maximize the value of reward points. So if you are strategic with a timing when applying for a new credit card, you are basically receiving free money.

[05:02] What I like to do is apply for a card with a sign-up bonus when I know a big event is coming up where I have to spend a lot of money. For example, a few years ago, I was planning for an upcoming wedding with my wife, so I knew I had to pay a lot of vendors. So we ended up applying for a few credit cards between us because we knew we were going to easily make the minimum $3,000 criteria a few times over.

[05:20] And we made sure to pay off the cards in full every month, so we didn't pay a single cent in interest. So we ended up accumulating enough points to go on our honeymoon for free with money left over for other things like supermarket gift cards. And you can do the same by following this strategy. Maybe you are renovating your house or you are booking your family holiday.

[05:34] If you see big expenses coming up in your life, then have a look around for some credit card deals with a big sign-up bonus. Another way to earn reward points is with your everyday spend. So most credit cards will pay you $1.1 per one dollar spend. Now of course, it is not as good as a sign-up bonus, but over time, the points will slowly build up.

[05:49] And getting something back is still better than getting nothing back. Depending on the card, they will regularly have promotions where you can earn double or triple the points if you shop at a certain place. You just have to be careful not to spend just for the sake of earning more points. Remember a previous rule to only buy what you were going to buy anyway.

[06:02] Like I mentioned before, depending on the type of credit card and the reward system, you can exchange these points for flights, household items, or even gift cards. It works the same way as a sign-up bonus point, except these points will be slower to accumulate. Most credit cards will offer frequent flyer points within a prominent airline.

[06:16] Here in Australia, Quantess and Virgin points are the most popular type of points you can get with a credit card. And there are different types of value in how you use your points. For example, you'll get more dollar value from upgrading your flights from economy to business class,

[06:28] then to use the points to buy gift cards. In the end, it depends on what you value most. Like I already mentioned, for me, the flight upgrades are that valuable to me. So most of the time, I will exchange the points to supermarket gift cards. I'll leave a link down below on the best ways to convert reward points if you want to learn more.

[06:41] The next rule to follow is to take advantage of all the other perks that come with a credit card. Besides the reward points, most credit cards come with a variety of free insurance and other perks. The most popular and useful one is travel insurance. Most credit cards these days will come with free travel insurance if you use that card to pay for your flights

[06:56] or some higher level credit cards don't even require you to use that card to purchase your flights. And plus, you can even add your spouse or partner to the insurance. Just check the disclaimer when signing up. As a general rule, I would always recommend you buy travel insurance regardless if you ever travel to another country.

[07:09] All it takes is one accident or piece of bad luck and your life could be turned upside down both physically and financially. The last thing you want is the full sick in a foreign country and have to worry about hospital expenses. So to have your credit card cover your travel insurance is a big plus for me.

[07:22] There are a few other cool perks that some credit cards may offer which I'll go through quickly. This price protection insurance which means if you buy an item for a particular price and you see the item reduced in price within a set amount of time, you can make a claim to your credit card and they will refund you the difference.

[07:35] Pretty cool, right? Some credit cards offer you lounge access at the airport. For example, in Australia, you'll have Qantas, Virgin or Amex lounge in most airports. Your credit card may allow you access to these lounges so always read the terms and conditions.

[07:47] Some credit cards even offer mobile phone insurance if you use their card to pay for your phone bill. This covers accidental damage and death to your smartphone. This means in the event that your smartphone gets stolen or you accidentally drop it and break the screen, your credit card company will pay for the replacement or screen repair.

[08:01] Now you may laugh at the screen protection insurance but with basically everyone owning a smartphone and how fast they won't move these days, this is the handy perk to have. I mean it may sound silly until it actually happens to you and you'll be glad to have it. Some credit cards waive all international fees meaning you can purchase things from international stores both online and in person.

[08:17] Without incurring foreign exchange fees. This is useful if you are a frequent traveler or you like to buy items from other countries like me. And just a small tip, if you are given a choice, always pay in the native currency and not in Australian dollars. It's almost always cheaper to pay in the local currency you're buying from.

[08:31] So these are just some of the perks that comes with owning a credit card so next time you're applying for one, it's always good to check what perks it comes with. By the way, if you are enjoying this video, consider subscribing to my channel as I make a ton of personal finance videos like this and you don't want to miss them.

[08:44] And please let me know in the comment section below what is your favorite thing about using a credit card? I always love to read all your comments and I will do my best to reply to all of them. The next rule to follow is to always review your monthly credit card statement. There are two benefits to this. One is a good security habit to ensure you have not been charged the wrong amount or for something that you did not buy.

[09:00] You cannot be too careful in this digital age where unfortunately online scams run a muck and as every chance your credit card details can get leaked. So if you're checking your statements every month and you do find some fraudulent charges, then just contact your credit card company.

[09:12] These days they are very good at dealing with these type of things. And since it's technically their money and not yours, the credit card company are more incentivized to help you. And the second benefit of always reviewing your credit card statement is to develop good budgeting habits.

[09:24] Some credit card companies even break down your monthly spend for you into different categories. So it's easier for you to see what you spend every month and you can assess whether it's reasonable or if you need to cut down on certain expenses that do not bring value to your life. You'll also make you more psychologically aware of what you are spending.

[09:37] And since you made it this far in the video, I have a bonus tip for you. And that is to use your credit card when booking hotels and travel higher. It's far safer to use a credit card instead of a debit card because like I previously mentioned, it's technically not your money.

[09:49] So if there are any problems with fraudulent or false charges, you can report it to your credit card company and they are more inclined to help you out than if you had a debit card. In addition, some car rental companies and hotels require a credit card pre-authorized payment for unexpected costs such as damage to your car or hotel room.

[10:03] Sure, you could use a debit card, but this may mean they lock away a large deposit of the funds from the account which may take weeks to be returned to you. So by using a credit card, you are locking away someone else's money. Plus, some credit cards come with complimentary car rental access and various other perks that may help you.

[10:16] Now that you've learned how to use a credit card properly to earn money, you may want to learn some ways to save money. So if you're interested, I want you to go check out this video on the screen where I talk about the top five ways to save money. So thank you for watching and I'll see you in the next video.