We’ve all heard about credit card points and miles by now—put enough of your expenses on plastic and you’ll be flying first class airlines all the time, right? We are actually fortunate in American (sorry for those of you residing in, let’s say Japan, who still are stuck in a mostly cash-based society) to be able to have incredible amount of credit card options to squeeze out every penny.

While the discussion of credit card hacking is reserved for another day, the goal of using credit cards to purchase goods and services is to redeem a certain amount of cash back (maybe 1% to 5%) or other means for travel that would otherwise be significantly more expensive than paid for using cash. The beauty of this system rewards potentially high spenders such as doctors.  Many credit cards also offer sign-on bonuses that can translate into several hundred to a thousand dollars of reward credit upon meeting a minimum spend. Doctors can use this to our advantage for purchases that we otherwise would have made anyway.

The amount that doctors are able to put onto credit cards also depends on whether we are employees of a hospital or owners of our own business.  Business owners have the luxury of making purchases that are considered business expenses, so typically have more spending power than employed doctors. This can be thousands of dollars of business expenses that can be paid for using plastic in order to arbitrate a return.

How do credit card companies afford to offer free money?

There is no free lunch.  All businesses that accept credit cards have to pay the issuing company a processing fee, or interchange fee, for each transaction.  These fees actually vary depending upon the benefits that the credit card confers.  For instance, a business will pay the credit card company a higher fee if a customer uses a 2% rebate credit card versus a 1% card.  Interesting eh?

This is relatively clear for doctors who run their own offices and accept credit cards of their own.  Someone is paying the price, so you might as well find a way to get the most out of it.

Personal expenses that doctors can use on credit cards

Aside from normal household spending, all doctors should be able to place a few big-ticket items on credit cards. The following are a few examples:

• Property taxes. we purchase a home, we have the option to place our mortgage insurance into an escrow account for the lender to pay.  If you can prepay it using a credit card, do it. This amounts to many thousands (tens of thousands) of dollars of expenses.
• Auto insurance, property insurance, and umbrella insurance. These expenses typically all go to the same company. Prepay using plastic and get some green back.
• Down payments on cars. If you end up purchasing a vehicle from a dealer or large sales company, you can often place the amount on plastic. I’ve done it before, twice.
• Meeting expenses. If your employer provides you with CME monies, you can pay for using credit cards and submit the receipts for reimbursement. If there is a significant amount to be reimbursed, consider timing your credit card application to the purchases.
• Utilities. Typically utility companies do not accept credit cards, although you can squeeze in your Internet and cable bills.

Business expenses for doctors

When you own a business, the sky is the limit for expenses.  Make sure that you squeeze every penny to put your expenses on plastic:

• Malpractice insurance. Some carriers will not accept credit cards, but many will.
• Medications and supplies. These are big-ticket items. Some specialties that use high dollar medications can truly rack up millions of points for these purchases. Don’t let this slip away!
• Prepayment of business taxes. Most processors for taxes will have a surcharge for credit cards, but sometimes you can find a credit card that does have a higher return than the upfront cost of the transaction.
• Utilities. Online advertisement, internet, cable, and shipping from your business can typically be placed on credit. This can also add up over time.

The skinny on credit cards

It is important to remember that playing the credit card “game” will by no means save you from poor financial decisions or help you reach financial independence sooner.  The amount that you will arbitrage will be no more than a few thousand dollars a year, which will hardly accelerate your retirement goal.  However, if you have to incur these expenses regardless of how you pay for them, you might as well take advantage of this opportunity.

“Smart Money, MD” is an ophthalmologist who blogs at the self-titled site, Smart Money MD.

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