Credit cards get a bad rap. Their use is often associated with out of control spending, lost money on late fees and interest and credit score destruction. While I agree all of the above can happen with credit card use, I also believe it is possible to use credit responsibly.
For the most, part I align with a Dave Ramsey philosophy and have read his book “The Total Money Makeover” – and highly recommend it. But, as with anything, I take his advice with a grain of salt. One of the main ways I go astray of Dave’s debt-free teaching is in the way of credit.
Save Money and Use Credit Responsibly
I have one credit card and I’ve actually had this same card for more than 10 years now. I only recall missing payment once, maybe twice, and that was actually back in college due to pure absence of mind. I use the card for sake of convenience and because I really like the points feature which allows me to save hundreds of dollars on groceries each year!
Outside of this one card, I only use debit cards, check or cash. Here are my tips on how to use credit responsibly and save money at the same time:
- Pay in Full Every Time: If you are going to use credit responsibly you have to have the right mindset and give yourself rules and boundaries where they often do not exist. This is where I think most credit card users get into trouble. One of those “rules” is to pay your card in full every time, every month no matter what.
- Treat Credit Like Cash: In order to achieve paying that card balance in full every month you need to treat your credit card and the purchases you make like cash. If you do not have the cash to pay for the item (in your checking account or savings or paycheck) you should not make that swipe to purchase.
- Save Money with Points, Rewards and More: When selecting which credit card to sign up for, think about what kind of rewards you could use most. Almost every card today offers points, cash back or an airline mileage accumulation feature. The card I use has a points feature which allows me to earn money toward groceries. In an average year I earn anywhere from $300 to $400 in grocery money! Similar to how I use Ebates, I use my card for large purchases to earn the most points possible.
- Don’t Make Purchases for Points: While credit card rewards can be fun and help you save money, in order to use credit responsibly you must not fall into the trap of making purchases with the sole intention of earning rewards sooner.
Do you use a credit card? Why or why not?