The seven mastery levels of credit card usage

There are many ways to use a credit card, probably as many ways as there are people using credit cards. And, just as there are no two people created equal, there are no two equal ways to use a card. We can’t really talk about each of those in detail so I just created this super-clever 7-level classification in the progressive mastery of credit card usage.

I ordered the seven levels by their increasing level of mastery, but not in the order people would go through them. Obviously, everyone will start at the “average” level (the third level in my arbitrary system). In a way, everyone has a shot at using credit cards in a clever way. From there, one would either go down to one of the first two levels (the “bad” ones) or up to one of the top four levels (the “good” ones).

So here are the seven levels:

Loser level

You abused your credit cards and they were frozen or shut down. This will not only cost money in the short term (interest, fees, penalties, etc.) but also cause all kinds of problems (not just money-related) for years. Oh well, what to do? I have no idea. (Or maybe I do: bankruptcy, credit repair, or a total mental reset.) Good luck…

Below average level

Have a few cards and have some balances carried over from month to month that cost money in interest. It is not too difficult to get out of this level, but most people just stay here because they think having a credit card is like getting a loan. WRONG!. Having store cards will also put you here.

Average use level

All credit cards are paid monthly so there is no cost. Most people will fall here. Occasionally one would use the card as an “emergency fund”; say to fix a car or some unexpected “permissible” expense and carry a balance incurring a cost but for a short period.

Smart level

Average use AND… all credit cards are managed following the rules I wrote about in this earlier post.

Cash-out level (“churning”)

Smart level AND… not only not paying anything out (interest, fees, penalties) but getting money in for using or having the card. This can go from simple cash back, category bonus cash back rotations, and reward points systems (including specific card point systems, hotel points, and airline miles). I prefer airline miles, but your miles may vary (YMMV), see what I did there? “Churning” will include also “manufactured spending” (Google it).

Bonus rewards level

Cash-out level AND… On top of getting cash or points or miles for spending with your card, you can make A LOT more in the form of sign-up bonuses that are paid when you open a specific card and spend some minimum amount of money in a relatively short time. This could be called “opening bonus rewards” level.

Tradelines level

The ultimate level (so far). At this level, you have a very good credit score (800+?) a pristine credit report, and a large set of (5 to 10) credit cards with a high credit limit and some seniority. You can use a portfolio like this to sell authorized user spots on your credit cards. People with a lesser credit score would pay for the short-term boost their score will get from this move; as people that need to take up a loan of their own or some other need. There is a whole business niche along this activity, called selling “tradelines”. I am exploring this myself.

Well, that was it. Hopefully, you learned something and didn’t waste your last few minutes. Up in there at the top of the post, I said that one starts on the third level, to then either go down or up. Of course, it is entirely possible to remain on the initial level forever and ever. Also, most likely, it is possible to switch from level to level following the particular circumstances of life. It is even possible to go from the low to the top and vice-versa…

What did I forget?

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