Credit cards get a bad wrap. Too many financial sites have the mantra of "no credit cards" and make you feel like an idiot for using them. I'll tell you one thing: it's not the cards' fault that people are getting into debt, it's the cardholder's fault. If you have no self-control or sense of financial responsibility, then you probably won't agree with this statement, but credit cards are wonderful things. When used the right way.
Why? Rewards of course! The way I look at it, every time you spend cash, you are leaving money on the table. You're missing out on rewards of some sort. The most basic reward credit cards offer a 1% cash back reward on all purchases. Get a fancy American Express, Discover to Chase card and you could be looking at rewards up to 5%. You can also get airline reward cards, hotel cards or other reward cards. The possibilities are endless!
If you are not able to pay off your entire balance every month, you should not use a credit card. The money lost in interest charges negates any reward that you will earn.
I get a hefty reward check every year from my main credit card and a little one from another one. I get these rewards because I use my credit cards. Every time I pay for something. I even have several bills set up on auto-pay through my credit cards. Why? Because I know that I will pay the bill in full every month and I want the rewards! To me, it seems silly to pay cash, or write a check if paying with a reward-earning credit card is an option.
I have my parents to thank for this mentality, who I remember telling me one time they used a reward credit card to put a down payment on a car. Genius! They knew they were going to be writing a check for the exact same amount either way, except instead of making it out to the car company, they made it out to Visa. Thus, collecting a nice reward for using the Visa as the down payment. Of course, this idea works on small purchases as well. It all adds up! I'm no big spender, but I've gotten yearly reward checks of a couple hundred bucks. Now tell me, could you use an extra $200?
I would like to reiterate that this whole idea does take the financial restraint to not spend extra just because you're using a credit card and does not work at all if you do not pay your bill in full every month. No credit card has a reward program that is higher than the interest rate they charge.
*In addition to rewards, I like credit cards for their convenience as well. They also provide a little extra peace of mind when traveling. When I know I have a few thousand dollars available on a credit card, I can rest assured that I am prepared for whatever might come up. I always like being ready but wouldn't want to carry a thousand dollars in cash with me while traveling.
To review, here are some tips on making credit cards work for you:
• don't overspend
• never carry a balance
• don't lose your credit card(s)
• use the card with the highest rewards whenever possible
• never spend for the sake of getting rewards
Hopefully this post rings true to you. You can really make credit cards work to your advantage if you are responsible and disciplined about using them.