Load the Revolver and Fire the Charger (Yes, I’m Giving You Credit Card Advice)
When I tell you to “load the revolver and fire the charger,” you might wonder, “Why is this guy using gun range slang in a financial blog post?”
Fair question. I’m actually talking about a simple principle for controlling your budget and not landing in credit card debt. It comes down to understanding the difference between two types of credit cards: revolvers and charge cards.
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Your Two and a Half Weapons of Choice
It turns out that behind the points and fine print, the basic principles of credit cards are not the same. First, you have revolving credit cards, which allow you to carry a balance over time without penalty. They come with an invariable interest rate, and that rate will be low if you have a good credit score or high if you’re still paying off your college extracurricular tab.
Revolvers typically have a fixed credit line (i.e., a maximum balance you can spend) based on credit worthiness. Typically, revolver lines go up to a maximum of $25,000 unless you’re a seriously high roller. If you carry your balance over the standard 30-day billing cycle, interest will accumulate on that balance. In other words, if you spend $200 on gas each month, you will end up paying more than $200—unless you pay off the balance within 30 days.
In contrast, with charge cards, you must pay off the balance in full every month. There is no credit line associated with them, nor any preset spending limits, but your bank will probably cut you off if you attempt to buy a new Tesla. Based on your credit history, you have an unofficial floating credit line.
Let’s say I have the American Express Gold Card, and I’m 23 years old. American Express will stop me at roughly $3,000 to $4,000 per month, and as I prove my credit worthiness, that number will grow substantially. The more affluent tend to like charge cards because they can: a.) rack up points, and b.) charge way more than $25,000.
Okay, I couldn’t fit “hybrids” into the title (“Load the Revolver, Fire the Charger, Drive the Hybrid?”), but they are worth mentioning. Essentially, hybrids are charge cards that let you carry a balance for a predetermined amount of time (perhaps two months). With some premium charge cards, banks will give you the option to pay over time, on a case-by-case basis.
When to Load the Revolver and When to Fire the Charger
Since it’s the sworn duty of every blog post on credit cards to somehow get this idea across, let me just get it over with: Don’t get into debt. Make some sacrifices if you have to—Starbucks lattes will still be around in three months. The only thing worse than making a bad purchase is paying your bank more than you would have paid the retailer.
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That said, let’s talk about how to use your revolvers and charge cards properly. For an example, let’s assume you have a Chase Sapphire Preferred and the American Express Green cards in your wallet. The Sapphire is a revolver, and the Green Card is a charge card.
First spending example: You have tripped and fallen down a set of stairs, and you are rushed to the emergency room. After all is said and done, you’re looking at a $10,000 bill. This will be tough to pay off within 30 days.
Put this bill on your Chase Sapphire Preferred. Yes, you will get hit with an interest charge if you don’t pay in full, but if you at least pay the minimum each month, you can take your time paying off the bill and not face penalties or take a hit on your credit rating. With the Green Card, you could not carry a balance without penalties. Thus, you “load” the revolver with a balance because it allows you to pay off the bill in a way that minimizes your financial burden.
Now, for every day spending—Netflix subscription, Starbucks, dinners out, clothing, etc.—“fire” the charger, as in use the charge card and then leave no balance behind. You want discretionary spending on a charge card because it forces you to limit optional purchases. Overall, you will become more cognoscente of your spending if you’re forced to pay off your balance within 30 days. You do not want to use a revolver and then pay interest on Netflix just because you wanted to re-watch your favorite episode of Friends.
So, the lesson from “load your revolver” and “fire your charger” is to make sure you have at least one of each card. Stop spending heavily on a debit card—you don’t get miles, points or cash back. You’re losing free flights to Paris and free hotel rooms in along the Seine. Get your big, unexpected purchases on a revolver and your day-to-day expenses on a charge card and enjoy the perks.
With over 10 years as a digital entrepreneur, Eric Adamowsky recognized the growing need for accurate and unbiased financial information online, particularly with credit cards. Credit Card Insider was created to give consumers accurate, unbiased credit information. Eric's tactical expertise and passion for building web brands will establish Credit Card Insider as the premier website for credit card information online.