All That Debt
You have a fair amount of school debt. You do not make much money in residency. You feel as if you are living from paycheck to paycheck.
Perfect! You are exactly the type of person who should get a credit card!
Let me preface this by saying I do not want anyone to go into credit card debt. If you do not have the ability to pay off your credit bills on time and in full, you can actively hurt your credit score. If you already have a lot of credit card debt, you should work on paying that off first.
But think about the money you are already spending every month. Are you putting all your expenses on a debit card? Or a credit card that you are not earning any cash back from? In all honesty, you are throwing money away. Nobody wants to do that.
The other thing to consider is this - residency is expensive. There are a lot of conferences and exams that you have to pay for. For example, here is a list of all the required expenses I had over the course of my three year residency.
After I sat down and put all my expenses into a table, I was honestly shocked with the total amount I had spent. $9,645? That’s the cost of a used car.
If I had put all my spending on a debit card, I would have nothing to show for it. If I used a credit card, however, I would have received at least some money back. Even with a very conservative estimate of 1.5% cash back, I could have at least $145 more in my pocket.
I know what you are thinking. $145 is not very much money at all. But keep in mind that this is an extremely conservative calculation that does not include spending or sign-up bonuses!
In reality, I have received a lot more value back. Here is what I did recently, for instance, when I had to sign up for boards.
Costly Computer Exams
If you look at the last line in my expenses, you can see that signing up for boards cost me $1,925. Ouch. In order to practice after I graduate, I have to be board qualified, so I didn’t have a way to avoid paying for an expensive day in front of a computer.
Credit cards to the rescue.
American Express just launched a new version of their Amex Gold card. The card offers 4x points on grocery store purchases and dining at restaurants. This is great for me as I spend a fair amount in those two categories every year.
The real kicker, however, is that the card was offering a 50,000 point sign up bonus after $2,000 in spend during the first three months. That sign up bonus is worth at least $850 to me, as you can see from my point valuation on the sidebar. Conveniently, the minimum spend requirement could be reached by paying for boards and essentially one trip to the grocery store.
So I signed up for the card, paid for boards, and got a lot of American Express points.
Of course this works for any credit card sign up bonus out there. Here’s my list of the best credit card bonuses currently available.
I will write about the Amex Gold card more in a further post, but yes it does have an annual fee of $250. However, if you sign up before January 9th like I did, there’s a bonus offer of up to $100 back for eating at restaurants. There’s also a calendar year airline credit of $100, so you could obtain $100 in December 2018 and then another $100 in January 2019. If you do the basic math, you’ll essentially get paid $50 to own the card, without even considering the sign-up bonus and other points you’ll earn.
One other thing - if you have never had a credit card before, you might have a hard time getting approved for some of the premium credit cards available. However, it is generally easier to be approved for a no annual fee card such as a Chase Freedom. Once approved, you can build your credit by paying off your credit card on time and in full every month.
Big Spend = Big Bonus
If you are considering signing up for a credit card, I would do it when you know you have a big expense coming up that you have to pay for. Otherwise, it can be challenging to reach some of the minimum spending requirements out there.
If you are fortunate to be in an institution that provides a good amount of Continual Medical Education coverage, you are giving yourself free money towards your next vacation or travel expense.
Sounds too good to be true right?