Credit Cards Don’t Have To Be The Enemy
How many times have you read that you should cut up your credit cards and use cash to pay for everything? For anyone who really can’t control their spending, this is probably good advice, but for the majority of people, this advice makes a credit card out to be more than it is. Properly used, a credit card isn’t the enemy… it’s just a tool, like cash or your checking account… and the right credit card can actually earn money for you, the same way a savings account accumulates interest.
We pay for everything with a single credit card. The credit card we use has no fees and gives us points back for every dollar we spend. When enough points have accumulated, we redeem them for cash. We use this credit card the same way we would use cash. We never charge anything to the credit card unless we already have the money set aside to pay for it. We keep a detailed record of every charge we make and we always pay the full credit card balance at the end of every month. The only difference between using a credit card this way and paying for everything with cash is that periodically the credit card company sends us a check when we redeem our bonus points. Don’t let anybody tell you that the only perks credit card companies offer are cheap merchandise and useless discounts… those bonus points are money we would not have if we were using only a cash payment method. Anyone who has good credit and shops around should be able to find a credit card with no fees and a similar cashback policy.
We use this credit card when we shop for groceries, pay the electric and telephone bills, whenever we buy gasoline and heating fuel, and for major items like appliances, as well as our business expenses. Many of these are regular expenses that must be paid month after month, and their total remains the same regardless of the payment method we use. It just makes sense to pay with the credit card and accumulate the cashback bonus that we would not receive if we were using only cash.
Obviously the use of a credit card does require some personal discipline, and I definitely do not advocate maintaining a credit card balance and making payments for less than the total amount due. No one can just keep building up charges without eventually having to face the consequences. But when a credit card is used judiciously and with common sense, a credit card is not the enemy… it is just another useful financial tool.
Written by Shirley | Filed Under Frugality, Personal Finance, Simple Living, Voluntary Simplicity
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Comments
Comment by Aaron Wakling:
Good Blog. I will continue reading it in the future. Nice layout too.
Aaron Wakling
Comment by MaryEllen:
This is exactly what we do! We buy everything with a credit card just so we can rack up points. We never buy anything we wouldn’t normally have bought and always pay it off at the end of the month. I guess we think of it kind of like a debit card -if the money is not in the bank, we don’t put it on the card.
Comment by Bruce:
I used to do the same thing. Getting money back was a great thing. We never carried a balance and loved getting the “free” money. Now I am not so sure it really worked. We were disciplined for the most part, but when I really analyzed what was going on, I came to see we really were spending more than we would have due to the convenience of the card. I doubt we really got ahead. So we fine tuned it a bit. Now we use the credit card for monthly bills, scheduled giving and very large purchases (that we have already saved cash for) only. So we still get “free” money from time to time. But for daily, consumer type spending sticking with the old fashioned cash has really worked out well.
Comment by Bryan:
Finally, some common sense advice about using credit cards! I am sick of people blaming their credit cards for their own lack of money sense. Like you I pay all my expenses with a credit card and those cash bonus points are a Godsend. I wish people would learn to use their credit cards sensibly and buy only what they can afford. Thanks for the super article.
Comment by Science For Kids:
Call me crazy but I actually put my teen on my credit card account. She does not carry it daily, but she is allowed to use it for authorized trips/purchases. Then we sit down together and pay the bill. I am hoping she gets the idea of responsible credit usage. Not just spending because you haven’t hit your limit yet.
Comment by Shirley:
Not crazy at all… I think you are very sensible to show your daughter by example and by letting her experience how to be financially responsible. I wish more people did this type of thing with their kids.
Comment by Alexandra:
Super post! We do the same. We benefit quite a bit from using credit cards. We pay off the balance every month and use the cash back bonus for gift cards to our grocery and hardware store. We never pay finance fees this way; payments are automatic so that we never forget. There are months where the cash back bonus is 5%. The free money is great if you can discipline yourself to treat the card like a checking account. You are so right; it’s just a tool, and a very handy one at that.
Comment by Diana in BGKY:
I paid off my last credit card balance in 1999 and have kept the card paid off monthly since then though I use it for most of my purchases. This keeps my checkbook simple to balance. I pay only bills I need a receipt for or have to pay through the mail. And I pay the credit card balance, again, in full online each month. I’ve worried that I might spend more money than I would have with cash, though probably not with a check…but I’ve found the convenience enough to continue. Recently I paid my tuition with my credit card. Paying the balance in full this month has made things tight until payday, but I had hoped to not pay interest and I didn’t have to. My other options were to take out a student loan, but I didn’t want a long-term loan hanging over me, or to borrow from my 401K but that was more trouble and expense (an up-front $75 fee) than it was worth. Both of those options would have required interest. So, I put the tuition on my card, thinking I might have to leave a few hundred dollars there until next month. My interest rate is pretty decent for a no-fee, point-earning credit card (I did not earn points for the tuition, btw). Credit cards were my downfall during most of the 1990s. But they weren’t fully the enemy; I put myself in a bad place and they helped me to get there and stay there. One more thing, as soon as I’m paid at the end of the month, I’m starting to save for the next tuition payment. I plan to be more prepared for it next time and to not have to sweat it.
Comment by Kevin:
All of my credit cards offer at least one percent back, and my Shell card gives back five percent on gas purchases. All of the cards are paid in full each month. When you consider that many bank savings rates are currently less than one percent (I have one small account at a local bank that currently pays .01 percent, but I keep it open for check cashing and the free ATM), I make a better return by spending my money than saving it! Not really, of course, but it is something to think about.
Comment by Sarah:
Thank you, thank you, thank you! Someone else who lives simply, but uses a credit card! There are so few people of my acquaintance now that do so, and it’s frustrating. I use mostly cash (which I rarely carry on me, except my gas money which stays in a hidden spot in my car) because I know myself well enough to know that if I keep any type of money on me (I don’t routinely carry my checkbook, credit cards, or debit card anywhere), I will spend it and I refuse to get into more debt than I can handle (currently, I’m simply stuck with my school loans…). I do use my credit card for purchases that I have money set aside already for those things (car maintenance, etc.) and it redeems money for my favorite vacation destination (I have the Disney Reward Card…). I am currently saving my rewards for my next trip with some of my friends. I have one other card that I very rarely use. I keep it only because the account has been open for a long time and that is good on my credit rating. Every once in a while, I utilize it to purchase something small, just to keep the account active, but never without the money set aside. This is all probably more than you wanted to know, especially since I am writing simply because I am happy to find others who utilize a similar system to me.
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