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If you read about my $350 credit card mistake, you know I made an expensive mistake but now have a good relationship with my credit card.
Below are the three reasons why I make all of my purchases with a credit card and have left my debit card alone for years:
1. Cash rewards
On top of the 1-3% cash rewards, I also get 25% more when I deposit the cash rewards into my checking account.
For example, if I get $100 in cash rewards and deposit it into my checking account, I will get $25 more or $125 in total of free money from the bank. Not bad!
I never make a purchase just because of the cash rewards. It’s all the things that I need and would buy with cash anyway.
2. Keep track of my monthly expenses
Mr. FAF and I don’t have a budget. I tried to talk him into making a budget a couple of times, but he refused.
He said it’s too much of a hassle to detail all the purchases/payments we plan to make for a certain month. It’s also a bit more complicated for us since we live in two different cities.
Mr. FAF and I each have our own credit cards. At the end of each period, we pay off all of our balances. And we know exactly how much we have spent in a certain month.
We can also go back to the transaction history to see what we bought. There are exceptions such as rent and electricity bills which are taken out of our checking accounts. But those are few and far between.
When our balances appear unusually high, we go back to the transaction history in our online account and track down the culprit(s), which fortunately doesn’t happen a lot.
3. Build my credit history
I’d love to buy a house with cash. But given our salaries and the high housing prices in the DC metro area, Mr. FAF and I don’t want to keep saving and chasing after the rapidly appreciating real estate market in DC.
I’m not sure how many lenders are willing to loan to people with no credit history. But for me, I just want to have a good credit score just in case.
Conclusion
If you’re responsible with money and mindful about paying off your credit card balance every month, I don’t see anything wrong with using a credit card.
However, if you plan to pay only the minimum every month, I wouldn’t recommend it since the interest rate for credit cards are ridiculously high (13.24% – 22.99%).
Dave Ramsey, my favorite financial advisor and radio host, may not be happy with what I just said since he’s totally against credit cards. But I guess we just need to do what works best for us.
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I think that credit cards are like a hammer. You can use that hammer to hit yourself in the face (and it will do way more damage than just your fist!) or you can use that hammer to build a deck (and it will be much more helpful than using your hands alone). Unfortunately most Americans are ingrained, by the desire to keep up with the Joneses, to compulsively hit themselves in the face financially. No wonder Dave Ramsey tells them to stay away from hammers! 😉 I use credit cards for the exact same reasons you do: rewards, tracking, and to have some kind of credit history.
I totally agree with you. Credit cards can make or break you. I like Dave Ramsey, but I will still use credit cards and try to be careful with them hehe. 😉
Love this analogy! And it’s so true. Credit cards are hammers!
I am on the exact same page! Credit cards are just fine. Just like almost anything else, if controlled. Yeah if you don’t pay attention to what you’re spending, you’ll be in for it, but just keep an eye on expenses. I do think using an app like Mint can really help keep track. We recently switched all our budgeting to Mint and use our chase sapphire and business ink cards for everything.
Ms. FAF,
I use credit cards for the first 2 reasons but it’s like wielding a double-edged sword. I know we’re spending more because we use credit cards but I’ve got to keep the MRS happy.