If this is your first time here, Molly’s Money is a regular series I write on this blog that includes ALL things personal finance – debt management, budgeting, home buying, savings, investment, etc. I am NOT a financial advisor, but I am married to one! These are just things that I have learned over the years as I struggled with my own personal finances and ultimately, became debt free in 2012. Got a question about money that you want answered? Leave it in the comments below or email me!
There are a few schools of thought on credit cards… and they seem to be either 1) DO NOT USE A CREDIT CARD UNDER ANY CIRCUMSTANCE or 2) Credit cards are fine. Use them wisely.
As I was getting myself out of debt, I very much fell into the camp of #1… don’t use credit cards. They are evil. etc. etc. etc. If you listen to Dave Ramsey at all, this is the camp that he falls into, for sure.
However, now that I have over two and a half years of being debt free under my belt, I’ve been able to have some practice with them, I’ve been educated on them, and I’ve now become more of the #2 camp… credit cards are fine as long as you use them properly and wisely.
I will be honest, there are some people that NEED to stay in camp one and NEVER use a credit card ever, ever, ever again because they do not know how to use it properly and, quite frankly, they probably will never be able to use one properly. So, if you fall into that camp and you KNOW you fall into that camp… then stay there. It is TOTALLY fine to never use a credit card ever again. BUT, if you can be disciplined enough to use a credit card wisely, there are a few tips and tricks that you can put into place to use them wisely and actually benefit from them.
These are in no particular order and these are certainly no the end all be all of tips, but I hope you find one or all of these helpful!
If you want to have a credit card, I would honestly have no more than one or two credit cards open at one time. You just don’t need more than that. Find a credit card with a great rewards program or one that you can benefit from.
Personally, my husband and I have two credit cards. One through our bank that we get a lot of points on (that we redeem for gas cards) and a Target Red Card. I got a Target Red Card because we shop at Target SO MUCH and we definitely save a lot of money by getting the 5% off each time. There is also a Target Debit Card that you can do the same thing with… but I wanted to work on building my own personal credit score some more, so I ended up going with the Credit Card.
There is NO REASON to have three, four, five, or gosh even ten credit cards open at one time. It’s just completely unnecessary.
If you are maintaining a detailed, line-item monthly budget, this should be easy for you. If you’re not, then this is going to be difficult. But you should treat that credit card like a debit card. If you do not have the money in your bank account to pay for whatever you are buying, then you CANNOT BUY IT. If you wouldn’t have the money to pay for it with a debit card, then you DO NOT have the money to pay for it with a credit card.
My husband and I use our credit card like a debit card. We make a purchase on it, we come home and record that purchase in our budget spreadsheet. It does not go on the credit card if we do not have the money to pay for it. Simple as that.
Pretend like the “minimum payment due” line of your credit card statement doesn’t even exist. You MUST, and I mean MUST pay off that credit card bill every month… otherwise you are literally wasting money and flushing it down the drain in the form of “interest.”
I understand that there are going to be emergencies and things that come up that you haven’t budgeted for that you may not be able to pay off right away… I get it. I do. And I’m not talking about those scenarios… those things happen and you can’t control them.
I’m talking about just the everyday purchases and monthly expenses that go on a credit card. They MUST be paid off. Otherwise, don’t own a credit card.
I’ve talked about the importance of monitoring your credit report before and I can’t begin to explain how important it is that you run a free, yearly credit check on yourself. Make sure that there’s no discrepancies that are showing up. Cards that have been left open that you forgot about… or a card that was opened in your name that you didn’t know about… etc.
Keeping a close eye on your credit score and credit report is vital for using credit wisely and properly.
How about you? Do you use a credit card? Do you use it wisely? What tips do YOU have for using a credit card and not getting yourself into debt trouble?