4 Borrowing Rules Rich People Follow but Others Often Don’t

Borrowing money may seem like something you only do if you don’t have enough of it, but that’s not true. There are many wealthy people who take on debt; they just do it in different ways than their less-well-off counterparts do. Of course, not every rich person has exactly the same money habits. But here are four borrowing rules the wealthy tend to follow that others often don’t.

1. Use debt as a tool

Wealthy people aren’t afraid of borrowing. But they typically don’t borrow money to live beyond their means or because they failed to save for emergencies or make a plan to cover expenses. Instead, rich people tend to use debt as a tool to help them build more wealth. For example, very rich people might borrow money to acquire a company if they think they can improve its profitability. They might also borrow to fund a startup business, or use margin in their brokerage account to invest in more assets that will help them build wealth.

2. Make credit cards pay you instead of you paying them

Rich people often use credit cards. But rather than paying interest to their card issuers, they collect rewards by charging all of their purchases and then pay their balance in full to avoid owing any interest. By collecting rewards and never paying credit card interest, wealthy people get richer as a result of their relationship with their card company rather than getting poorer. Many rich people even sign up for cards with large annual fees, but they do so to take advantage of valuable perks those cards offer, such as concierge service, flight or hotel upgrades, and more.

3. Don’t borrow for depreciating assets

Typically, rich people know it does not make sense to borrow for anything that is going to go down in value over time instead of up. By borrowing for things like cars, consumer goods, groceries, or vacations, you end up making those purchases more expensive and thus wasting money on them. Unless whatever you are borrowing for is going to grow your wealth over time, it’s not worth paying interest charges to fund it.

4. Make lenders work for your business

Finally, rich people don’t just accept whatever loan they’re offered on whatever terms the lender wants to give them. They often make lenders work for their business. This could involve doing something as simple as shopping around to get different quotes before deciding which bank or credit union to take a loan from. Simply comparing offers allows you to go with the company that gives you the best deal — rather than just going with a financial institution you happen to find first. Wealthy people sometimes take this process even further. They may ask for discounts on fees or other special borrowing perks, especially if they have a relationship with the lenders and can leverage that into getting better loan terms. The good news is, you can follow all these rules even if you aren’t already wealthy. And doing so could help you become rich yourself over time.