4 Surprising Ways Millionaires Use Credit Cards
by Eric Volkman | Nov. 1, 2018
The ultra-wealthy use their credit cards in very intriguing ways. Do you share any of their habits?
To twist around a famous F. Scott Fitzgerald quote, the very rich aren't that much different from you or me -- at least in relation to credit cards. Just like our humble selves, the ultra-wealthy rely on plastic to help fund their expenses and extravagances.
As a rule, however, those with access to large amounts of capital tend to be more careful and strategic about their credit card use. Here are a few ways millionaires use credit cards.
1. They hold only a few credit cards
Several years ago, a financial writer named Tom Corley conducted research on the fiscal habits of wealthy individuals. Among other interesting tidbits, Corley discovered that a mere 8% of such people used more than one credit card.
This might be a bit surprising; if you're wealthy, why wouldn't you grab every card available to you?
There's no way to speak for every millionaire, but the key advantage of having one, or just a few, cards is obvious. Owning a small number cuts down on the time and effort needed to manage them. This is particularly true of modern credit cards, which often have extensive rewards programs.
Also, the wealthy tend to own cards that have very high credit limits. So a small handful of such cards is typically enough to take care of their spending needs.
2. They get paid by their cards
High net worth individuals tend to favor credit cards that ladle out the rewards. After all, if you're spending a lot with them, you should get as much possible in return from your issuer.
Happily for these customers, card issuers are well aware of this preference. As a result, they tend to be comparatively generous with rewards. Some cards, for example, put no limits on how much a cardholder can earn under its rewards programs.
The rich also benefit from cards that are flexible in their rewards programs. Some cards allow cardholders to redeem their points with a relatively high number of transfer partners.
3. They pay them off on time, and in full
Many, if not most, wealthy individuals got that way partially due to smart and prudent financial management. We at The Ascent firmly believe in being timely with credit card payments, settling them in full every month when and however possible. Anecdotal evidence and hard research indicates that rich people habitually follow both principles.
This helps preserve their finances. We should always remember that credit card interest is extremely high, since the issuers need to make a profit from their business. Even a modest amount of debt can spiral into a big problem if not paid down.
High net worth spenders might use their plastic often for purchases, but the smart ones consistently pay off that debt before it becomes a problem.
4. They travel very comfortably
The rewards-heavy cards favored by the rich also tend to be stuffed with perks and features. Wouldn't you offer such things if you were an issuer aiming to attract high-spending clients?
Many of these extras are concentrated on travel, and the perks can be plenty. Among them are:
- Airport lounge access
- Partial credit for ticket purchases
- Primary car rental insurance
- Trip cancellation/interruption insurance
- Credits for ride-sharing services
- No foreign transaction fee
With these travel benefits packed onto their plastic, the wealthy can get to their destination and move around in a high degree of comfort (and peace of mind, thanks to those insurance perks). Also, using a good card as a go-to spending instrument, they rack up those rewards points/miles without incurring an annoying foreign transaction fee.
Our credit card expert uses the card we reveal below, and it could earn you $1,148 (seriously)
As long as you pay them off each month, credit cards are a no-brainer for savvy Americans. They protect against fraud far better than debit cards, help raise your credit score, and can put hundreds (or thousands!) of dollars in rewards back in your pocket each year.
But with so many cards out there, you need to choose wisely. This top-rated card offers the ability to pay 0% interest on purchases until late 2021, has some of the most generous cash back rewards we’ve ever seen (up to 5%!), and somehow still sports a $0 annual fee.
That’s why our expert – who has reviewed hundreds of cards – signed up for this one personally. Click here to get free access to our expert’s top pick.
About the Author
We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.