Credit cards are awesome. If you're not using a credit card for every purchase, you should be. Apart from the free benefits that pass many people by -- like automatically doubling your warranty up to an extra year on almost all purchases (including electronics) and refunds on prior purchases in the event of a price drop (remember the first iPhone?) -- credit cards allow you to earn cashback and other rewards. Of course you won't be able to quit your day job, but free money is free money. As long as you have some self control, you can make the system work for you instead of against you.

This post lays out how I run my credit cards. You should first familiarize yourself with the video clip Don't Buy Stuff You Cannot Afford. To make this work, you must never pay any fees and you must never pay any interest. With that in mind, let's get started.
  1. Find a card with a rewards program that matches your spending habits
    Finding the right card can be one of the most challenging parts of the whole process. Ask yourself basic questions about your spending to help you figure this out. Where is all your money going? What is it that you're buying all the time? Where are you shopping? If you don't use credit cards exclusively yet, you should first look for a good general-purpose cashback card (e.g., the highest reward amount you can find that is not dependent upon purchase amount, location, category, etc.). If you already have a general-purpose card like I do and are now looking to get some extra goodies, try to pinpoint an area of your spending for improvement (e.g., a certain category or certain store that gets a large share of your money) and find a card that gives higher rewards to this area.
    • The best general-purpose card I've found was the Capital One No Hassle Cash Rewards card, but the version I have is no longer offered. It beat out the other cards because you could earn 1.25% on every purchase instead of just 1%, but Capital One is now charging an annual fee for cards with this option.
    • The best gas card I've found is the Discover Open Road card. They offer 5% cashback on the first $100 of gas and automotive purchases each month. Since it's a Discover card, it's not specific to any particular gas station so you can use it anywhere. Another bonus is that you can use it at Sam's Club (which generally has the cheapest gas around) and still get the 5% discount. At $4/gallon, you save $0.20 on each gallon of gas purchased with the Discover Open Road card so you are effectively paying $3.80/gallon. Although you must redeed cashback in $20 increments, the rewards never expire as long as you use the card. Obviously, since you are only earning 5% on gas and since you stop earning 5% after the first $100 per month, you should only use this card to buy gas and only up to $100 per month! Any gas once you reach the $100 monthly limit as well as all non-gas purchases, should, of course, be purchased using your general-purpose cashback credit card (in either of these cases, the Discover card turns into a crappy tiered reward system starting at 0.25% -- yuck).
  2. Double check for deal-breakers
    • Anything with an annual fee is out, no questions asked. This generally means airline credit cards. You aren't going to spend enough each year to recover the cost of the annual fee. The idea here is to save money, not spend $59 a year on absolutely nothing.
    • Stay away from tiered reward systems. This means you should avoid things like the Blue Cash card from American Express. You aren't a big spender, remember? If you need to spend $6,500 before you start earning decent rewards, you aren't winning.
    • Avoid reward systems with expiration dates. You aren't going to be making money hand over fist (in fact, it's quite the opposite), so don't run the risk of losing your cashback because you didn't earn enough in X months.
  3. Apply for the credit card online
    I'm assuming you know how to use the Internet, so this should be self-explanitory. Since you probably aren't going to read all of the terms and conditions, make sure that you save a copy of everything you "agree" to during the application process.
  4. Card activation and automatic payment request
    When you receive your card in the mail, follow the activiation instructions (call the number on the front of the card from your home phone). You will be sent through an automated activation system, then transferred to a sales representative who will try to upsell you other products and services offered by the company. It is important that you refuse all of this value-added crap! Do not let them give you a free trial, you must outright refuse. Don't hang up, however, because you need to speak with someone about automatic payment. Most likely, the credit card company has an automatic monthly payment option that allows you to have your entire statement balance withdrawn from your bank account each month. Usually you must call customer service to have this activiated, which will result in a paper form being mailed to you. While you're on the phone with customer service, have them mail you this form (or have them transfer you to someone who can mail you the form) so you don't need to call again.
  5. Privacy policy opt-out
    As soon as you've hung up with the activation line, you'll want to stop your credit card company from cashing out on your personal information. Look through the documents that accompany your credit card and find the privacy policy leaflet. Located in the middle of this leaflet will be a section titled "How Can You Limit Sharing of Information About You?" with a toll-free phone number or website. Call the phone number and opt out of both kinds of information sharing. You don't want your creidt card company sharing information with non-affiliated third parties or within their family of companies.
  6. Setup your online account
    Of course you'll want to keep up with your credit card accounts online, so sign up for an online account. Enable paperless statements to stop your credit card company from mailing you a paper bill every month with your personal information written all over it.
  7. Automatic Payment Setup
    When you are signing up for automatic payments, make sure that you choose the option to have the entire statement balance automatically withdrawn from your bank account monthly. The key is that you must pay the entire balance every month! If you're paying any interest, you're not winning. Setting up automatic payments will ensure that you are never late on your payment, and that you never pay interest for carrying a balance.
    • Mark the date that that automatic payment will be withdrawn on your calendar. Have your calendar notify you 3 - 4 days before the payment will be withdrawn so you can ensure sufficient funds are availble in your bank account.
  8. Win
    Use your credit cards for thier outlined rewards purposes. Never pay interst or fees and get cashback deposited to your bank account or applied as a statement credit. :)