Are Credit Cards Bad?
This is a common question that comes up in personal finance. Some people, Dave Ramsey, Suze Orman, and that crew are anti-debt and credit cards. However, my other favorite author Robert Kiyosaki says learn how to control debt and use it to make money. No matter where you are at in your money journey, or what your philosophy is on Credit Cards, at some point you have been faced with the credit card dilemma. I will share what I do in this post and how I got out of debt, paid cash, and now use credit cards.
When I was paying off debt I did not use credit cards
When I was paying off my student loans I only used my debit card. I had a credit card in my back pocket, but I refused to use it. During this time of extreme budgeting and frugality I learned the power of self-control and only spending what you have. This core competency to money management helped me be more responsible with my future spending habits. You can use the budget template to start building good self-control habits.
I am RICH!
I am not perfect, I will admit that. After paying off debt, my net worth was at $0. However, I felt like I could do anything, I was a baller now! NOT. I went out and got an AMEX because I thought it was so cool to be 23 and have an AMEX. Wow was I wrong. Aside from me thinking it was cool it didn’t have any magical "upper echelon status hack". The one positive part wast that I was introduced to money back :). I knew credit cards were good for fraud protection and obviously ease of use, but now I discovered my favorite part of having a credit card, the perks.
Budget and Perk = Win
Since I now know how to stick to a budget and understand the power of money back. I streamlined all of my expenses into a credit card getting 1.5% cash back on everything. So what that means is if my living expenses are $2000 per month then my credit card gives me $30 a month for using it. After 3 months I usually buy myself something like a new pair of shoes, clothes, or use it if I go over budget.
I was recently telling my friend that I don’t have any of my bills pull from my checking account because that sounds risky. Having to know that on the 9th this happens and the 20th this happens seems like a lot to remember for me. What I do is put every expense on to my credit card and pay my credit card bill once a month when it is most convenient for me. This has helped me tremendously because I pay bills on my terms not theirs!
Regardless if you use credit cards or not, there is no right or wrong answer. If you have had a bad experience with credit and need to remove it from your life, go for it! I have found that there are several benefits if you have control over your spending and live on a budget.
If you are currently in credit card debt I wouldn’t recommend using a credit card while you pay off debt, to me that does not make sense. I would recommend creating a budget you like and stick to that for several months and see how it goes.