Credit Cards for Good

Credit cards are bad, right?  They entice you into running up monstrous amounts of credit card debt from which you can never recover, and then they swallow your children and keep your grass from growing.  Get real.  Of course credit cards aren’t bad when they are used properly.  In fact, for some purchases, a credit card can be the best option you have.

The most obvious advantage to using a credit card is the protection that it offers the consumer.  A lost or stolen credit card is virtually unusable for the thief, and if he does manage to charge something, you can dispute the charge, and most likely never have to pay it.  Try that next time you lose some cash.  In a more extreme example, an airline goes out of business, and you are left holding a three hundred dollar ticket.  If you paid by cash, you most likely will not get your money back, but a credit card company can reverse the charges.  

Some credit cards even come with limited but useful rental car insurance when you are traveling.  Still others offer no extra cost travel insurance, which can cover unfortunate mishaps that may happen while you are on vacation. 

Frequent flier miles, material credit card rewards, and even credit card cash back incentives make using a credit card a wise choice for those people that are able to responsibly pay off the total credit card balance each month. 

Well over half of Americans carry at least some balance on credit cards, with many of them holding onto several thousands of dollars of credit card debt.  These people probably should not be using credit cards.  Unfortunately, people in debt tend to charge more to credit cards, and get more in debt.  This is especially bad when you use your credit card for daily expenses, like many people do already.

You get a grace period with a credit card.  Sometimes referred to as ‘float’, you can use a credit card to make purchases when you know the money is on the way.  For example, let’s say you have a $300 bonus check from work coming, and you want to buy something with it.  Use a credit card that offers a 1% cash back bonus to purchase it.  Take the $300 and put it into an interest bearing account until you have to pay the credit card off.  You’ve earned your 1% on the purchase, plus any interest paid on the deposit. 

Using a credit card simply makes sense if you can use the extra perks and credit card services some of them offer.  You may not be able to use the store coupons or flight coupons, but everybody can use some cash back. 

Most credit cards offer start up offers to entice you into signing up.  There is no shame in taking full advantage of these credit card offers.  Gas credit cards often come with a hefty percentage off gas purchases or any other purchases.  Once the introductory offers expire, you can simply close the account, or if you like the credit card interest rate, use it wisely.  Just remember to PAY IT OFF EVERY MONTH.

Playing the system for maximized credit card rewards only works if you only buy what you need.  If one credit card company offers you a 10% cash back bonus if you buy thirty tire irons, you probably would do better to save the cost of thirty tire irons.  It works for more practical examples as well, such as buying a bigger television than you were looking for because of the bigger credit card reward.  You’ve still spent a $1000 too much to get maybe $100 in bonuses. 

Watch out for limits on the rewards and refunds you can get.  When you reach the limit, stop.  It’s that simple.  Read the fine print on your credit card agreement.  Make sure that you can use the rewards.  The credit card may offer a free vacation, but it will make you book a ski trip in August. 

As always with credit cards, watch out if you are deep in credit card debt.  A credit card, no matter how wisely managed, is not going to dig you out of debt.  Often people in debt are tempted to over use a credit card, and this definitely does not help their situation.  Some credit counselors suggest cutting up credit cards to prevent you from using them in an injudicious manner. 

Of course, never using a credit card is often a pain as well.  When you go to a cash economy, you lose many of the consumer protections that are offered by credit cards, not to mention the ease of online shopping. 

Make sure to have the best credit card available.  A credit card with a high interest rate is of little value.  Shop and compare for a credit card online.  Once you find the best credit card, fill out the quick and easy credit card application.  There is no reason to be stuck with a bad credit card when there are credit card offers for low rate cards, high reward credit cards, credit cards with low rate balance transfers and more.

The bottom line is that you have to learn how to control your spending.  Follow the basic rule to financial freedom.  Don’t buy something if you can’t afford it.  It’s as simple as that.  If you can afford it, go ahead and use the credit card, it’s not like your soul will be sucked into a steaming void if you do.