How To Effectively Use Credit Cards

I received a blog comment the other day that wasn’t too favorable. In a “real life” face-to-face situation, I would quickly become defensive and feel the need to justify myself; but in the realm of blogging I don’t have to. Not everything I say is going to resonate with readers. I realize that not everybody is going to appreciate what I say or understand where I’m coming from. I’m okay with this.

In order to show my “okay-ness” I wanted to come out and make a blanket statement. It may offend, and for that I’m sorry, but I want to provoke thought and conversation.

Smart People Use Credit Cards

One prejudice I have is towards people with a distaste for credit cards. Nothing leads to greater concern and confusion than when I hear the statement “I hate credit cards.”

To put things into perspective, I’m going to use a metaphor that I read long ago from JT at Money Mamba. He compared credit cards to fire. When fire is used properly, it can do amazing things. When fire is in the wrong hands, it’s highly destructive.

In much the same way, credit cards can be both useful and problematic, Heaven and Hell. Between the rewards and increased protection that a credit card provides, you have to be crazy to not use them. Instead of being part of the crazy crowd, read the reasons below on why you should (and shouldn’t) use credit cards.

Reasons To Use Credit Cards

Needs

Sometimes emergencies do arise and we don’t have the cash on hand to fund them. Although you should always have sufficient savings to cover emergency expenditures, I’m okay with people using a credit card on unexpected expenses.

Rewards

There are many credit cards that are offering extremely lucrative rewards. Whether it’s 5 points or 10,000 miles, when converted to dollars it’s typically worth it.

Protection

Have the peace of mind knowing that you won’t be held responsible for fraudulent or unauthorized transactions. You don’t have this same protection when swiping as debit.

Perks

Most credit cards include additional perks beyond the rewards being offered. This includes extended warranties, cell phone insurance, and roadside assistance.

Reasons Not To Use Credit Cards

Wants

While I’m okay with someone tapping into a line of credit in case of emergency, I’m not okay with a spending splurge. With the exception of maybe a house or car, if you are not disciplined to save up for something, you shouldn’t be purchasing it. I will once again reiterate: credit cards are tools for spending, not borrowing.

Discounts

Many stores offer discounts for signing up for their store credit card. Department stores such as Macy’s, Belk, and Sears are infamous for this. When you actually calculate the savings you’re receiving, opening the new card is rarely worth it.

Conclusion

I was steaming when I started writing this post but I have since simmered down. What was meant to be offensive turned out to be rather constructive. Whether you use credit cards or not may change the way I view your discipline and intelligence, but I still realize that they may not be for everybody. If you are tempted to spend more when carrying plastic, then carrying a credit card may not be optimal. If you play with fire, you may get burned.

Spend wisely.