There are plenty of people who don't have and don't like credit cards — for very good reasons — but I love my credit card. (It's a Chase PerfectCardâ„¢ Visa® but now Chase offers the Chase PerfectCardâ„¢ MasterCard® instead.) This might seem strange, considering I manage a fairly long-running blog carnival on debt reduction, but when used correctly they carry a few clear advantages:
- Seamless tracking of expenses. I've set as a goal to track my money better, but using a credit card for most purchases makes tracking expenses quite a bit easier, as the charges are labeled by merchant and are all in one place each billing cycle.
- Purchases can be cheaper through rewards programs. My card offers 1% back plus 3% on certain other purchases, and this reward is credited right off of my next bill. Almost no waiting, no points to redeem, and no “point inflation.”
- Purchase protection. Credit card charges can be “charged back” to the merchant under some circumstances, and many rights are afforded to combat fraudulent charges and limit the loss suffered.
- No additional charges to use. (At least there shouldn't be.) Since credit card fees are borne by the merchant, your bank shouldn't charge you a per-transaction fee. The merchant shouldn't either, but some merchants will try to assess a fee or demand that you charge a certain minimum amount. If they do this, they are violating their merchant account agreement and risk losing their merchant account.
- Free float. If you pay your balance in full each month, you get use of the money for free. It's only for a few weeks, but hey, why not?
These are advantages if you use the card correctly. What does “using the card correctly” entail?
- Paying off your balance in full each month. If you purchase things and pay off the bill in full each month, there's no interest charged. If you don't, then they charge you interest unless you have a 0% teaser rate. Getting a 1% reward makes no sense if you're paying 17.99% on your balance.
- Purchasing as if you're paying cash, psychologically. One of the mesmerizing qualities of credit cards is that it doesn't feel like money. It doesn't smell like money, and you don't feel the electrons going out of your wallet the same way you would feel three twenties leaving your wallet. Removing this psychological distance between a credit card and your money goes a long way toward responsible credit card use.
- Purchasing carefully. Online transactions are quite safe as long as you pay attention. Be aware of phishing attempts and make sure that you see the padlock in your browser (or check that the website's address has “https” in front) when you make an online purchase.
- Reviewing your statements. First, to look for fraudulent activity. Second, to review your “automatic” charges to see if you still need the services you're paying for each month.
Credit cards can be useful tools rather than just pure, concentrated liquid evil, but they need to be used correctly. If it's difficult for you to use them correctly or if you've decided just to stay away from them, then that's a great decision, too.
I agree tha how you use a credit card is the issue. Rewards from our mastercards include cash back, so it is making a little bit of money for us.
I agree as well. Some people cannot resist the temptation, so they shall avoid credit cards. Doesn't mean credit cards are evil.
I see a lot of "this is not my fault, this is someone else's" in most "credit cards are evil" posts. It is always easier to blame someone else rather than take responsibility for one's own actions. Credit cards aren't enchanted by bad evil wizards to force their owner to take them out of the wallet to buy stuff. It takes an active action. As to "the majority of people use credit cards to buy more than they can't afford", as my mom told me when I was little and tried to excuse my actions saying that other did it: "if everyone is going to bang their head against the wall, are you going to do it too?". One doesn't need to do stuff just because "everyone does it". This is why we have free will.
The point you make about purchasing carefully is on my mind as 2007 concludes. I pay my balance each month and enjoy the rewards on my credit card. PenFed is my favorite credit card (5% back on gas 1.25% on everything else) as a statement credit. But I wonder if I spend more when I use my card than if I paid cash. I reckon I do and that makes me think the rewards aren't worth it. I am very interested in hearing the experiences of others.
You have to pay off your card evey month and it really should be a rewards card as well. We have a State Farm Visa card and use it for everything and the rewards pays for our insurance on our 4 Runner for the year.
It's nice to see someone else is writing about the positives that credit cards can bring. It's so important that people use them the right way, but there are numerous benefits that can't be had with any other payment methods. Thanks for the great read!
I agree with what you said that credit cards are not liquid evil. We should not blame credit cards saying that their presence tempts you to become a great debtor. The discipline is still in us. Paying off monthly bills in full and on time is a very big help to avoid an increase in your credit card debts. We should limit ourselves in spending too much beyond our means too. However, if we really can't control ourselves from overspending, there is this debt consolidation to help you out with your uncontrollable, increasing debts.
I personally use Credit card in my daily work process, but i only use with when i am not bring any cash. But i will pay before the month end. What i notice people normally did is they only pay the minimum payment, that actually a bigger problem. We should not pay a minimum payment, but pay full for every transaction that we made at the end of the month.