Have you heard that credit cards are bad and that you should not use them? There are a couple of financial gurus that say NO credit cards. And I want to talk about this and the question should I use credit cards?
SHOULD I USE CREDIT CARDS?
First, I want you to think of you (because it is all about you!) and think of what type of spender you are? Are you:
- The spender that buys things because it’s on sale, looks cool, or you saw someone else with it. You don’t worry about the cost because you can just put it on the card and pay for it later. In other words you DON’T HAVE THE FUNDS.
- The spender that buys things because you have the funds. But you use a card to get points or cash back. In other words, you HAVE THE FUNDS.
Please note you could be a 1 that uses the card for points but the main thing is do you have the funds WHEN you make the purchase.
Have you decided what type of spender you are? Maybe you’re both? That’s OK, just acknowledge where you are!
If you are a spender 1 in any way, you should probably take a break from the cards… And here is why.
WHY YOU SHOULD TAKE A BREAK
The biggest reason someone should take a break from credit cards is to change your mindset and behavior.
Credit cards get a bad rep because lots of people use them irresponsibly. A credit card allows you to spend far more than you have but has a hefty interest rate if not paid on time. This is when a credit card can be dangerous. And this is the mindset and behavior thing: spend more than you have.
A credit card is a mini loan (normally has an interest rate of 10-30%). So if makes it possible for you to buy something you don’t have money for right then. But this is where people go wrong… If you don’t have the money by the time the bill is due, interest is added to the amount, making it even harder to pay the next month and the next… This is the cycle and before you know it, you have lots of credit card debt.
We have had credit card debt and it is so easy to say, I will just put it on the card and pay for it later. And we did pay for it… If you have the mindset that a credit card is a way to buy things now that you can pay for later, you need a break from them! Because if you are not in credit card debt now, you will be! You need to change your mindset and pay off the card completely every month!
Plus if you have any outstanding balance on any credit card, STOP USING THEM until they have a ZERO balance! Stop building on them. Cut up the card if you have to. We did and it was the smartest decision for us!
It is very easy to buy things with credit cards but if you do not have control over your spending, things can go downhill… So how do you find control?
This question could be a whole post so I will try to shorten it. The quickest way is with your spending. Remember that mindset and behavior thing; you need to think about these. What is your weakness when it comes to spending and how can you change your mindset/behavior?
By doing this we have found control over our food spending and now I am using credit cards again!
MINDSET & BEHAVIOR
I have brought up these words so let’s talk about each of them.
- MINDSET: I am referring to how you see credit cards. Yes, they are a loan but you should never look at it this way. You need to change your mindset and ONLY think of any card as CASH. So if the money is not in your bank account, DON’T spend it. If it’s not in your budget, DON’T spend it.
- BEHAVIOR: I am referring to how you spend your money. Are the things you are purchasing adding value to your overall financial plan (aka: your goals)? Is that item worth your hard earned money? Think about these questions more when making purchases. Even better procrastinate buying the item to see if it’s a want or a need.
These two things will help a lot when you are thinking about spending money. I know it’s easier said than done but try it!
WHY YOU SHOULD USE CREDIT CARDS
Again only use credit cards if you have control on your spending and you have the mindset that any card is just like CASH.
Credit cards can be a really big asset to you if you use them responsibly. Here are a couple of reasons you should use them.
- FREE STUFF (AKA: MONEY)
The biggest reason why we use credit cards is because of the cash back or points you get for using them. Why would I pay with cash (remember the credit card is cash, only spending what you have!), when I can get 1%-4% cash/points back on that purchase. FREE money, yes, please!
SIDE NOTE: this is one way the credit card companies get you to overspend, so be careful.
We currently have three credit cards and all of them we get points back. One is for an airline company, another hotel, and one for our outdoor gear. This has allowed us to travel for cheap (free plane tickets and free hotel rooms) and get fun stuff for the outdoors.
I have heard of some people using the cash-back cards and they get back enough cash to pay the rent/mortgage for a month or that years Christmas expenses. Who would not want something for FREE just because you used a credit card and paid it off?
- HELPS YOUR CREDIT
Your credit score is very important if you want to get a loan. And one way to help it is by using your credit card and paying it off completely every month.
Credit cards can be wonderful but sometimes cash is the better option. Either because your spending habits or the company will cut the cost of the item if you use cash. But if you have control of your mindset because you are using that card just like cash. Then use the card to give you FREE stuff and help with your credit. I really hope you see the value a credit card can be when used responsibly. So pay off that bill every month and only purchase items you have the money for and that CARD WILL START PAYING YOU!