Please hear me out. I know Dave Ramsey says that you should cut up your credit cards and never use them again. I respect Dave and think he is a very intelligent man and he has helped so many people. This post is not to bash him in any way or state his program is wrong. It is just my thoughts. In my opinion, there are some benefits using credit cards when they are used correctly.
For those of you who live under a rock Dave Ramsey is a businessman, author, radio host, and motivational speaker. He developed a very popular personal finance program to help people get out of debt. Yes I have personally read his book “The Total Money Makeover” and I think he does have some good points. I think his plan is a great way to start your journey if you don’t have a plan because he breaks it down into steps. One of the main things I don’t fully agree with is his view on credit cards. Dave says “Responsible use of a credit card does not exist. Credit card debt is a major problem in America.” I do agree credit card debt is a major problem in America but I think there is a way to responsibly use a credit card. Let me explain why.
Disclaimer: This is just my opinion. I have a budget and financial plan. I try my best to stick to it. Of course I am always learning but I do not abuse credit cards. I have never missed a payment and have always paid off my balance in full each month. I have never paid interest.
First, let me explain how I use my credit cards.
I have my utilities, car insurance, and a few other expenses automatically charged to my credit card each month. This way I always pay my bills on time and I get the rewards points from those bills ( I will discuss rewards points shortly).
I rarely use cash (I know gasp!) but to me, it is much easier to use a credit card. I just have to carry my license, credit cards, and a few other things. It is also easier to handle credit card fraud than debit card fraud. I know this from personal experience. It can take a while to get the money back in your checking account and then you are literally without the money. When handling credit card fraud, you did not pay any money yet so it is super easy to fix and doesn’t affect the money in your bank account.
I use a credit card for my groceries, birthday gifts, gas, food, etc. These expenses are in my budget so I know what I am paying. I do not spend money that I do not have.
Recently I booked a flight to Australia which cost $1,300 (I know it’s super expensive but I have been saving for this specific trip for a while). I received so many rewards points for that flight! I paid the amount for my flight immediately so it didn’t have any effect on my credit card balance but I got the points! I use my credit card to book all flights, hotels, adventures because you need to pay with a card when you book online and this way I get the points. The important thing is that I always have the money for it (or will by the time my balance is due) so I’ve never paid interest.
Now on to why I personally think it is important to use credit cards:
Most people will encounter a situation when a bank or company will check their credit. For more details on credit scores check out my post “Why You Should Care About Your Credit Score“ but having an excellent score will really help you in the long run. Personally, I’d be saving for an extremely long time before I would be able to buy a house in cash (probably would be saving forever). An excellent credit score helps you get better interest rates on your loan. Moral of the story is a credit score is important and using credit cards responsibly is one way to increase your credit score.
There are so many different credit cards out there and various different rewards. If you love to travel you can get a rewards card that helps you get points for flights, hotels, and rental cars. Currently, I have enough points for about a $800 flight, hotel room, vacation, etc. That is a free trip! You can also get cards that offer cash back or other rewards. For me, the rewards are worth it. I end up getting cash back or getting points to redeem for gift cards, gifts, or travel that have really benefited me.
There are a few keys to success when using a credit card:
- Don’t spend money you don’t have. This is NOT free money. If you don’t have the money in your bank account or cannot pay off your balance in full each month then don’t do it. It does take self-control.
- Choose a card that is best for you. There are wonderful cards without any annual fees that offer cash back or travel rewards. Check out my post “5 Tips For Choosing a Credit Card” to learn more.
- Download the phone app for your credit card. I have the Capital One Venture card and the Capital One app is so helpful. It notifies me each time my card is swiped so I would know immediately if someone else used my card. I also know exactly what I spent that day so I can enter it into my daily budget. You can also check your credit score, credit card balance, and make payments all from the app.
If you want to use only cash for a few months until you have more control over your finances that is perfectly fine. If you want to use cash for your everyday expenses & for your variable costs, go for it! I have nothing against cash (for me it is just easier to use a credit card) so if you feel more comfortable with cash then use it! It is all personal preference. I just don’t think you should rule out credit cards forever because they do have some benefits when used correctly.
What are your thoughts? I want your feedback!