Most people don’t play the credit card game, meaning they may use cash or a debit card as their primary method of payment. Some of these people may have a credit card that they rarely use just for emergencies. In this post, I will be discussing the six types of credit card users.
Type 1: Passive Users
These credit card users don’t know much about their own credit cards. They do not actively compare or shop for new credit cards and they do not understand the benefits or interest charges that come with their lines of credit. People in this group may use their cards daily, but they leave lots of money on the table. Those who apply for credit cards to pay for large expenses at the 0% introductory period may also fall under type 1.
Type 2: Multipliers
These users are into multiplier cards that offer 2X, 3X, 4X, or 5X points. They know enough to get points, but they won’t know the best strategy for utilizing their points. For example, you can get a Discover It card or Chase Freedom card combined with higher level multiplier cards to maximize points. With Chase, the best way to use points is to pay for travel, assuming you have the Chase Sapphire card that boosts the value of your points for travel spend.
Type 3: Redemptions
Building on Multipliers, these users typically use trifectas or some combinations of cards to maximize points for redemption. These users know how to transfer points between cards of the same brand to utilize multipliers and points boosts. Subscribe if you are interested in learning about the Chase Trifecta, Citi Trifecta, and AMEX Trifecta. These topics are scheduled to be published soon.
Type 4: Balance Transfers
These users utilize credit cards to pay off loans. Most new credit card offers will offer a 0% introductory period for 12, 18, or even 24 months. These introductory periods typically come with a 3% balance transfer offer. Let’s use a 0% for 18 months, 3% balance transfer fee example. You can take your 7% interest student loan and pay a 3% fee to transfer a huge balance to your credit card, where you will have 18 months to pay off your loan, interest free. If you can pay off the chunk you transferred in 18 months, you would have saved 4% interest on that chunk. That could be hundreds if not thousands of dollars in interest savings. These users keep applying for new cards to pay off their large loans as fast as possible, including mortgages. Note: A mortgage balance transfer can only happen with MasterCard. Visa does not allow mortgage balance transfers.
Type 5: Partners
These users will transfer points to partner cards. Some partner cards will offer 1.5X, 2X, 3X or more if you transfer points to them. For example, a hotel through the Chase Ultimate Rewards Portal will cost you more points that booking through your IGH Card. By transferring your points from your Chase card to your IGH card, your points become more valuable towards hotel spend. This type of user needs to do lots of research to know how to maximize their points for travel.
Type 6: Master
This user is a master at maximizing travel rewards. They are frequent flyers who are okay with jumping through hoops to maximize their rewards. These users transfer points, search through different travel booking sites, airline sites, and hotel sites to get the most value from their points. Type 5 users are the minority as you need to be a high spender to earn enough points.
What type of user am I
I consider myself to be a Type 3 Redemption User. I use my cards in combination with each other to maximize my rewards. I also change my strategy every 3 months when the quarterly rotating bonuses change on some of my cards. I don’t travel enough to be a Type 5 or Type 6 so I will likely stay as a Type 3 user indefinitely. If you are subscribed, you would know I promote Velocity Banking. Velocity Banking uses the strategies of type 4 users to pay off large loans. I am using a 2.99% home equity line of credit, or HELOC to pay off my mortgage in less than 7 years. Follow my mortgage payoff progress here. I don’t need a 3% balance transfer credit card because my HELOC is offering 2.99%.
What type of credit card user are you? Comment below.
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