The love for our credit cards didn't start early. I remember in college, whenever my friends and I would hang out, they'd throw down their plastic to pay for everything. But after the fun was over, I'd hear horror stories of increasing balances. (My friends may still be paying for the drinks they bought me.)
This behavior of many people has driven them to denounce the existence of plastic money. Dave Ramsey, a financial guru in many eyes, believes there is no advantage to their use. He thinks:
1. They destroy your budget by causing you to consume more.
2. The rebates are useless.
3. If you have to, only use debit cards.
4. There is no reason to have them.
These definitive statements stop you from thinking. But if we're trying to be different, then let's think differently. Let's question.
Questions open your mind to learn.
The statements on the left turn your brain off. The questions on your right trigger you to think.
Lazy Thoughts
They destroy your budget.
The rebates are useless.
Only use debit cards.
There is no reason to have them.
Engaging Questions
Could they help me budget?
Could I utilize the rebates?
Why not use a credit card instead?
Is there a good reason to have them?
Could they help me budget?
A lot of companies allow you to break down your statements online. You'll be able to see where you are spending your money. Our American Express Blue Cash Card allows us to view the spending categories of Travel, Restaurant, Merchandise, Auto, Other Merchants, and Fees and Adjustments.
One time we were looking at our account and noticed our cell phone bill was roughly the same for the past few months. It triggered us to call the company and we dropped down to a lower plan since we were not using a lot of minutes. With relative ease, you can get a big picture of where you are spending your money and if it's time to adjust your budget.
Could I utilize the rebates?
When I was with my first company, I travelled in and out of New York on the client's dollar. I applied for an AAdvantage Credit Card and a Hilton HHonors Credit Card. For every dollar I spent on my AAdvantage card, I received one point towards free flights. Whenever I booked a Hilton hotel room with my Hilton card, I received five points per dollar towards free stays.
For our week honeymoon in Hawaii, our flight was 100% paid for by points and our hotel stay was 50% paid for by points. I still had a lot of points to last us a few years. Those points were totally free to me because I was ultimately reimbursed by the client or my company. That's a good enough reason for me to have credit cards.
Now, we use our American Express Blue Cash card. We get 5% cash back on everyday types of purchases like groceries and gas. Now, does paying for gas with my card make me drive more? No. But I'm using it to recapture dollars that I would have paid with cash otherwise.
Why not use a credit card instead?
Dave says if he has to, he only uses a debit card (i.e. for travel). I'm not sure how that feels any different, only the fact that you immediately spend your money. But now you'd have to worry about how much is in your bank account. Ever been charged an overdraft fee?
And have you ever experienced this: You want to withdraw money using your debit card. You can't find your bank ATM. Now you've just got double charged by the ATM bank and your bank for pulling out your money. To me, a debit card is fine...but a credit card can offer so much more.
Is there a good reason to have them?
I know one good reason: emergency. You may be in a situation where plastic is your only option for payment. You may not have a bank or an ATM from which you can withdraw money. There are even merchants that won't accept personal checks.
Consider having one just in case you need it. It's always better to be prepared and not need it, than need it, and not have one.
So, let's present the wild card question that would make Mr. Ramsey squirm in his chair.
Could I use it for investment purposes?
Let's say you are presented with a great deal. You have no cash on hand and you don't have enough in your bank account. Taking out a loan would take too long and there are no hard money lenders available to you.
You can use a cash advance check linked to your card. You can fill it out like a check and it can be used as funds. If you are in need for funds in a hurry, these checks are always an option.
One of my favorite things about my credit cards is that I don't have to carry a wad of cash everywhere with me. It's probably been months since I've paid cash for anything. It's convenient and I think it's safer as well. When you lose cash, or someone takes it, it's gone. But if you lose your card, which I have done, you can cancel it.
The problem people encounter with credit cards is not the card itself, it is their lack of control. Learn to control your spending. Because if you can't, it doesn't matter if it's plastic, metal, or paper...you'll squander it.
We've been using plastic for years. Don't try to beat the credit card companies. Just use them as a resource.
Key Points
1. Credit cards can be useful for budgeting.
2. Take advantage of rebates when you purchase goods and services that you would have purchased with cash otherwise.
3. Cash advance checks can be a resource for funds in an event of an emergency or when money is quickly needed.
4. A plastic card is never the problem. It's the responsibility of the spender, not the card.
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