I love getting questions from readers. While I try to respond to each one, some do slip through the cracks. When I get the same questions over and over, I know those are topics I need to write a blog post about.
Today’s topic is one of those. After they learn that we rapidly paid off $144,00 in debt (I’m still in shock about that), people are often surprised to learn that we use credit cards. Many debt-smashing advocates are decidedly against using credit cards.
I’m totally fine with that. If you don’t want to use credit cards, I totally respect that. We can still be friends.
If you have a moral aversion to credit cards, it’s definitely not worth using them for the reward points or any other perk. Compromising your integrity for convenience or rewards wouldn’t ever be worth it.
Are credit cards evil?
To me, asking if credit cards are evil is like asking if the internet is evil or if a hammer is evil.
Neither is inherently good or evil. They are just tools. They can each certainly be used for good, but they can also be manipulated and used for evil as well.
In the right hands, a credit card can be used to do good. In the wrong hands (which isn’t the same as “bad” hands), credit cards can be harmful.
Just because a tool has the potential to do harm does not make it bad.
Credit cards aren’t right for everyone
Before I talk about the benefits of credit cards, I want to be perfectly clear that credit cards aren’t for everyone.
Recovering alcoholics shouldn’t walk into bars. Recovering pornography addicts shouldn’t have internet access at their fingertips.
If credit cards are dangerous for you and have caused you financial trouble in the past, avoid them like the plague!
If you don’t have the funds available to pay off your credit card in full each month, don’t use it at all.
Avoiding credit cards isn’t a sign of weakness, it’s a sign of strength. It takes determination and will power to stand up to your weaknesses. Doing everything in your power to avoid temptations shows strength of character, not weakness.
Smart Reasons to Use Credit Cards
I want to share with you the reasons that my husband and I use credit cards, but I don’t want you to confuse them with the reasons you should or should not use credit cards.
Convenience
Call me lazy, but it’s a lot easier to swipe a card than pay with cash. While this is precisely the reason that many get into trouble with credit cards, we use the convenience within the limits we set for ourselves in our budget (and have the track record to prove it).
When I’m in the checkout at the grocery store with anywhere from one to four small children, it’s much easier to swipe my credit card than to dig through my wallet for cash or write out a check.
When I have a van full of kids or am in a hurry, it’s much easier to pay with a card at the pump than go inside. At some fuel stations in our area, there’s an extra charge to use a debit card at the pump, so credit it is!
Organization
Using a credit card makes it really easy to know where your money went. Having a monthly statement that shows when and where you spent money helps you keep your records straight.
Of course, to know the details of a transaction, you’ll need a receipt, but having a credit card statement is really useful if saving receipts isn’t one of your strengths
Safety
If I lose my cash envelope for the month’s groceries, it’s gone. However, if my credit card is lost or stolen I can get a replacement and have any fraudulent charges removed. In fact credit card companies are getting really good at catching fraud even before you do. If an out of the ordinary charge shows up, my credit card company calls me to verify if it was really me or not.
Additionally, if I purchase something online, and the item delivered is not what I ordered, I can dispute the charge with my credit card company.
Rewards
Credit card defenders often tout the rewards available from their cards. We love our credit card rewards. Different cards have different rewards programs, but we generally prefer cash back to gift cards or airline miles or merchandise, so we use a card that easily allows us to apply our rewards to the credit card statement each month.
Even though we aren’t big spenders, we still get something like $40 cash back each month just from using credit cards for most of our purchases. For my business credit card, I got almost $500 of travel expenses reimbursed thanks to the sign up bonus.
Other Perks
Credit cards offer a wide range of additional perks. One of our cards, from American Express, doubles the manufacturer’s warranty on purchases. We used that card when we purchased a new camera a few years ago.
Other cards allow access to VIP areas in hotels, provide automatic lost baggage insurance, include roadside assistance, give a discount on currency exchange, offer complimentary subscriptions to free shipping programs, and more. By choosing a card with perks that matter to you, you can enjoy some real benefits at no cost (as long as you pay off your full statement balance every month!)
Credit cards aren’t the problem
Credit cards aren’t the right tool for everyone. They can (obviously) be dangerous for some people.
I don’t think the credit card is the root of the problem though. The issues of poorly handling money run deeper than the tools used to mismanage money.
When used wisely and responsibly, credit cards can be useful tools.
Curious How we use credit cards with our zero-based budget? You can read about how we use credit cards in our budget here.
What do you think?
- What’s your take on credit cards? Are they evil?
- Which side of the credit card fence are you on?
That makes a lot of sense that it’s easier and faster to swipe than pay when you have kids along. Sometimes you have to simplify things like that as a parent. Using credit cards for money you’re going to spend anyways (like groceries) is a good way to build credit, too.
I wanted to add my voice to the pro-credit card chorus specifically to highlight the travel perks, which are all the rage in the niche category of travel perk bloggers, but which seem to be noticed less elsewhere. Since I got my first mileage card in 2010, I’ve flown roundtrip twice to Asia, three times to Europe, once to Africa and once across the US, never paying more than $70 for a ticket (taxes & fees). Two of those trips were in business, four were in peak season, and I still have 250,000 miles left to play with. This is them basically giving away free money. I stack and layer my three cards, all of which are tied to the same airline alliance, based on their bonuses and perks by spending category, and I always make sure to maximize the return on whatever promotion they’re running – it’s a bit over the top, but it works. These really are extraordinary cards, and I’m very fortunate that I’ve figured out a spending system that works for me, which I absolutely realize isn’t the case for everyone. I just wish more people realized how great these perks are instead of gasping at the mere thought.
Credit cards are absolutely evil FOR ME. I hate them. Actually, after reading this post, I went ahead and closed my last one. The perks aren’t worth the interest for me because I don’t pay them off in full every month. When I look back on the times when I was happiest financially, it’s when I was not using credit cards.
I can understand some people keeping one for travel, or just because they can handle it, but I’m not disciplined enough to not use it for other purchases. It’s easier to just have a second free checking account with cash in it to use while traveling. Great post.
Good for you Deb! That is perfect. If the tool is not serving you well, then definitely get rid of it. That takes discipline though, so good for you! 🙂
While it’s not going to make us rich, I’m happy to get back $200-300 a year in rewards. I use it to help pay down our mortgage. Last year, I earned 10% back on many of our holiday gifts because that was the extra big reward that month (Amazon shopping). I don’t spend what’s not budgeted already, but anything that can go on the card, does. I have found I actually tend to spend MORE when I carry cash, even when budgeting. So that leaves me with debit or credit, and while they may sometimes have the same protection, if my debit card is breached, that money is GONE until the bank refunds it, which could be quite a while. If someone uses my credit card fraudulently, my balance may be run up while they sort it out, but I have lost no actual money from a bank account! The rewards may not be a ton, but I’m not leaving free money on the table. I also like to keep a healthy credit score since credit scores touch many areas of our lives past accruing debt, and using a credit card responsibly helps there, too. PS-I am a HUGE fan of Dave Ramsey, but credit cards/ scores are one area where I think Suze Orman’s got it right, not Dave!
Yes! I love it when there are the special offers where the % cash back is higher. It’s espeically good for us when one of our cards has a higher percentage back on gas, since we go through that like water around here (living in the boonies + long commute). I appreciate Dave Ramsey too, but we don’t agree on everything. 😉
Using credit cards can be very smart as long as you’re smart in how you use them. We pay ours off EVERY month, but use them for every purchase that we can. Since we have all cash back rewards cards, we end up getting checks and statement credits on a regular basis for purchases that we would have made no matter what.
I love the statement credit cash back. Since we have the money to pay the credit cards off earmarked in our budget, when we apply a statement credit it really does leave cash in our hands.
Love this Stephanie. People are often shocked when they learn that we have $600k of student loan debt AND that we use credit cards. And I totally agree that it depends on the person! Some people should steer clear of them, especially if credit card debt has been a problem for them in the past. We aren’t really over spenders. In fact, I actually detest spending money. So, if I am going to have to spend money on all the things we need like gas, food, electric, etc, why not get cash back rewards for doing so?
Yes! It’s convenient to have the “gift” of not being a spender. That definitely makes credit cards a lot safer for you!
New reader here! I found your blog through a post from Blogging Away Debt. Thanks to Ashley! (http://www.bloggingawaydebt.com/2016/10/the-green-eyed-gimmies/)
I must congratulate you for paying off so much debt. Absolutely fantastic job!
And, no, I do not think Credit Cards are evil. I have owned Credit cards since early 90’s and to this day I have not paid a single penny in interest. I have taken every advantage that they offered and just with one credit card, I was able to score more than 10 “free” roundtrip tickets between Turkey and the US over the course of 20 years. I had 5 credit cards for a while but, in time I got rid of three and I am quiet content with the two I have. One is for backup purposes and the other is my main card.
Welcome Tpol! Thanks for the kind words!
That is amazing that you’ve earned that many free flights over the years! Wow! That’s definitely nothing to sneeze at! And great job not ever paying any interest!
I love that you wrote about this! Many people I have run into speak with an almost arrogant tone about their refusal to use credit cards. Credit cards can certainly lead to financial troubles if they aren’t used responsibly, but just not using one is no guarantee of financial stability either.
I find that I am more careless when spending with cash, as I can justify a purchase by saying, “oh, I have $6 here with me.” I buy the (usually unnecessary) thing, and forget about the purchase. When I use a credit card, however, I know I will have to face that expense again.
I also tend to be more careless when spending cash! And it’s exactly because I know I’ll have to see the expense again either when budgeting or paying the bill. Until I read this post it never occurred to me that people – other than those with spending issues, of course – would spend more with a credit card than they otherwise would. I even sometimes put off getting things I need because I hate seeing multiple small transactions on my bill, so if I forget something at the store instead of running back and completing a separate $5 transaction I’ll either decide not to get it at all or wait until my next visit!
I recently spoke with a devout Dave Ramsey follower who was shocked that I use credit cards, and even after I said I pay the balance in full every month and get several hundred dollars in cash back a year they asked why I would pay interest through the credit card. I was shocked! I told her I never pay interest because I pay the card in full every month… I couldn’t believe that someone who is so budget-savvy wouldn’t understand the full picture!
That is interesting how different our spending mentalities can be. Some tend to overspend with credit cards, while others spend more freely with cash! I think I’m probably about the same no matter my payment method. Unless writing checks was my only option, then I’d decide to have a no spend month for sure! 😉
I’ve known people too, who didn’t understand that you could use a credit without ever paying nay interest.
That is good that you know yourself that well. If cash burns a hole in your pocket, then definitely don’t keep it around! 🙂
I completely agree that credit cards aren’t right for everyone. For us, even though we’re paying off our debt, we do continue to use our credit cards. I wrote about this last week, but I had my bank account drained when we were in grad school because someone accessed my debit card number through iTunes. We were in the middle of a 3 hour relocation, and that was money needed for groceries and bills. Getting MY money back was such a stressful experience that took months, and I wasn’t reimbursed the overdraft fees either. Using our credit card helps protect us from fraud, and make sure our bank account isn’t drained again.
Oh my goodness! That is scary and frustrating! That sounds like a mess to recover and that really stinks that you were still stuck with the overdraft charges!
We had an American Express Costco card for a few years. Even though we paid off the balance every month, we spent a LOT more than from before we had it, justifying the rewards and cash back. And one month when I went to pay the monthly balance on-line and didn’t click “submit” all the way through and got charged a late fee, we cancelled it and our Costco membership, it wasn’t worth it for us. We use a debit card for convenience but the rewards and travel points aren’t worth it for me to get sucked back into our old way of spending more. It would take a lot of self discipline and we’re not quite there yet. Maybe in the future.
Good for you Lisa! That’s great that you recognized that having the credit card was enabling you to overspend. Deciding that an accidental late fee isn’t worth it is a totally valid reason for not messing with credit cards too.
We had a mishap like that before, where we tried to pay/thought we had paid and ended up with a fee and interest. I had my husband call and explain and they took both the fee and the interest off because they could see that we always paid on time in the past. (Just in case anyone else is in that position in the future and wants to give that a try)
I’ve got absolutely no problem with using credit cards. If you have a spending problem, then by all means, don’t use a credit card. There’s no doubt that credit cards are probably adding an additional risk you don’t need.
But if you’re running a consistent surplus, then credit cards are just a smart way to make a little bit of money on your purchases and keep your money organized. I use my credit card for everything I buy. It’s really the only way I can keep track of it all./
I don’t think credit cards are evil, but for some people, they are unable to handle the responsibilities. Personally, we do a half envelope system and the rest on a credit card. We pay off all purchases at the end of each month, and we never have any trouble.
I agree! Do what works for you. It sounds like you have a system that works for you!
Yes, thank you for writing this! My husband and I have a real problem with a certain financial peace celebrity that constantly says you are are an idiot if you use a credit card. We have been using a credit card for our expenses for most of our married life. It has been paid off every single month and never used it as free money. We use it like a debit card. If the money isn’t in our account we don’t spend it. Another thing that you didn’t mention in the convenience aspect is that if you are using cash only and you need milk from the store for supper and your husband is driving right by the store, he can’t stop and grab the milk, so it ends up costing more because you have to go and use more gas and supper is late because you had to go to the store..but with using a credit card hubby can stop and grab the milk and you are good to go! 🙂 thanks for your blog!
That’s a good point Kristi. It would be tricky to split cash between two people if both could potentially do some of the shopping. That could make for some messy reconciliations.
I like my credit cards for two main reasons. First, when we travel, I can charge things on my credit card to get the most current exchange rate and no foreign transaction fee. Second, the rewards (I prefer cash back too) are nice. If you’re going to spend the money anyway, you might as well get a little something back.
Ooo getting the current exchange rate! I hadn’t thought of that one! 🙂 Thanks Amy!
I love the protection of a credit card! I was traveling once and used my debit card to buy lunch and within an hour $400 was stolen from my checking account. My husbands job pays at the beginning of the month and it was during the last week! It took the bank over a week to recover our money. Had it been a credit card, it would have been way less of an ordeal! Now, I only use a credit card when I travel!
Oh Christin that’s super frustrating! I’m glad that the bank was able to recover your money though. It’s also good that it was the last week of the month (even though I’m sure it was a tricky week), rather than after the paycheck was in the account and it could have been wiped out too!
I was just asked this very same question last week, by someone who knew I was a Dave Ramsey fan and she was SHOCKED that I use a credit card that gives me cash back rewards. I was quick to tell her that in the 10 years we’ve had the card, we’ve paid off the balance IN FULL every.single.month. But, unlike you, I did admit to her that in my particular situation, I know for sure that I spend more with it…because I’ve switched to cash many times and have spent less. But anyhow, I just wanted to say that this post was very very well-written, thoughtful and thorough, not to mention timely. Gonna send it to my friend right now. Thanks, Stephanie! 🙂
Thanks for the kind words, Liz! That’s good that you know yourself well enough to know that you spend more with a credit card than you would with cash. Yet, that’s great that you still pay it off each month.