February 10th, 2012 
Lindsay Where do you fall on the credit card debate?
Some people are staunchly anti-credit cards. Others think they are the only way to pay for purchases. After dealing with a huge amount of debt for the last six years (at least), we are starting to see that there is life after debt, and we have to make some decisions about credit cards. I’m doing some research on the topic and so far one thing is clear: People who have an opinion have a strong opinion. Here are some things I’m finding out about credit cards:
Reasons to Have a Credit Card
Rewards - Many credit cards have rewards that “pay you back” for your purchases. Even 2%, if you use it for all of your purchases, can add up quickly.
Protection – When you purchase something with a credit card, there is a certain amount of protection built in to that purchase. Credit cards make it easy to contest charges, and some credit card companies offer warranties on items that you purchase.
Ease of Use - What’s easier than pulling out your credit card to make a purchase? (This could go in the “con” column as well.) Credit cards also make it easier to track your spending and see where your money is going.
Reasons Not to Have a Credit Card
If you have one, you’ll use it - With cash, once it’s gone, it’s gone. A credit card doesn’t work the same way. You can continue to spend as much as you want, and hope you can pay the bill later.
The risk of not paying it off every month - The only time credit cards are considered acceptable (even by proponents of credit card use) is when you pay off the balance in full every month. Back to the self-discipline issue, if you don’t budget and manage your money well, you will quickly find yourself paying finance charges. Those can quickly snowball to a mountain of debt if you’re not careful.
You spend money differently with credit than you do with cash - According to many spending experts, we spend more with credit cards than we do with cash. (In some cases, up to 42% more, according to Dave Ramsey.) This seems like a risk to your budget if you don’t have a lot of self-discipline.
So what’s the conclusion? Should you use a credit card to take advantage of the rewards, protection that it offers, or stay away from them like the plague? Before you choose, decide:
- Can you stay within your budget if you’re carrying a credit card?
- Do you have the self-discipline to buy only what is already in your budget, and pay it off every month?
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We have credit cards but we always pay in full at the end of the month. We think of it like a debit card and never consider not paying it.
If we had past problems with credit, I would definitely not get another until I was sure that my new lifestyle was ingrained in my thinking. It would be too easy to fall back to old habits or even forget about that credit purchase until the end of the month.
It is annoying to pay the credit card bill. If you forget, it is a huge late fee and we have had problems with paying for one account but the payment actually went to another account. It is not fun to deal with credit companies.
Since I don't use my card for every purchase, the perks are not that good for me. Often, my points expire before I get enough saved to use them. Every dollar we spend is one point and a $20 gift card is around 4000 points. So if I spend $4000 on my card, I get a $20 restaurant gift card that I must remember to log in, buy with my points and wait for it to be delivered. Is that really a perk?
We almost solely use one credit card for all our purchases because of "cash back" rewards. We use it like a debit card and pay it all off at the end of the month. When we earn enough cash back points, that money always goes to paying the credit card. We never use our points for gift certificates or other prizes because of the "cash back" option. If we started charging outside of our means and started going into debt this way, I would want to cancel our cards. It has worked for us thus far but its not for everyone.