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Many years ago, I got myself into a large amount of consumer debt and had to climb myself out. I was sloppy with my money and lived outside of my means. I'd been down that road of overspending and I used my credit card to dig that hole. From using my college ID to charge snacks in college to maxing out my credit cards a few years later, I was not the right person at that time to have a credit card.
Related: Rock Bottom
I discovered Dave Ramsey not long after maxing out my credit cards, and I locked my cards up, paid them down and eventually got out of debt. With my history of mishandling credit cards, you would think that I would want to avoid credit cards at all costs.
In all reality, I am not a big fan of credit cards, especially if you can't control your spending. However, I had such a mindset transformation after getting out of debt, that I can use a credit card with no problems.
The decision to use credit cards was not taken lightly. My wife and I actually sat down and discussed whether to use a credit card or not. We felt strongly about staying out of debt, but liked the option to build up points that would allow free flights. Therefore, we eventually decided that using a credit card would be okay for our family.
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Reason #1: Paying the Balance in Full every Month = No Interest Charges
"Interest that you PAY is a PENALTY, and Interest that you EARN is a REWARD!" - Chris Hogan
The main reason we still use a credit card today is because they don't charge interest if you pay your balance in full every month. I hate paying interest, and would not us a credit card if this option was not available.
You have to think of interest as a penalty! Every time this penalty is charged, the bank wins and you lose. With this mindset, we set our credit card to automatically withdraw the entire balance of the credit card each month. We have even set the following stipulation: If we can't pay the balance in full one month - - - no more credit cards!
You must make this decision also. If you continually are paying interest on credit cards, you must get out! You must avoid interest at all costs! If this means that you get rid of your credit cards...then make that decision!
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Reason #2: Earn Credit Card Rewards!
In the case of a credit card company, they earn money every time you use their card. Therefore, they offer you rewards to entice you to use their card. For my wife and I, we have been able to benefit from the reward offerings. We are simple people and I don't credit card hop, mainly because of the time requirement and everything else, but I have heard of people that get loads of free flights by taking out new credit cards every year.
That's not us. We have two basic credit cards. We have a Southwest Airlines Visa and an Amazon Prime credit card. We use the Southwest Visa most of the time, but the Amazon Prime card has came in handy as a back up. Twice this year, our credit card information has been stolen. We have been without our Southwest Visa for probably 5-6 days each time. Therefore, it was nice to have a back up.
Even though we aren't credit card hoppers, we have been able to benefit from the rewards points offered by our credit card company. Just this year, we have purchased 3 round trip flights for free with our points. That's one round trip flight for my wife and I to Nebraska for my sister's graduation and one round trip flight for me to go to Oregon in September.
With our rewards from the Amazon card, we have been able to apply the earning to credits on the account and use the rewards to buy items on Amazon. Recently, we purchased a gift for my niece using rewards points and the gift was entirely free.
We believe that the rewards offered by the credit card companies are worth it, if you aren't paying any interest. Once you can't pay the balance in full, the card is no longer worth it.
Interested in signing up for the Southwest Airlines Visa? Click here.
Reason #3: You Can Track Every Expense
Ever since my mindset shifted away from spending to saving, I have been a huge budgeter/tracker of our finances. Basically, I am a numbers nerd and enjoy diving into the numbers weekly. Using cash does not allow me to track every expense.
I could use a debit card for everything and I could track each expense. However, I could end up getting my card number stolen and I would be without my debit card for 5-6 days. Without a back up, that would be a long time to not have a way to pay for anything.
Therefore, both my wife and I like using the credit card, because it allows us to track each expense. Both of us feel like we spend more with cash than we do with our credit card, because we know that a credit card expense will show up on a report later. However, if we have cash, that expense will not show up. It just goes away into thin air.
Using Credit Cards is Your Decision, Not Mine
It's called 'personal finance' for a reason. Just because using credit cards is right for my family, doesn't mean that a credit card is right for you. You have to be able to control your spending and avoid paying interest. If you can't do that, you shouldn't have a credit card.
Do you use credit cards? What rewards have you earned from your usage of credit cards?
