Is Using Credit Cards a Good Idea?
Yes, if you do it right...
|Why Using Credit Cards Is a Good Idea|
One of the most controversial topics I have covered on my blog or in my books about saving money is credit cards. Apparently suggesting that people use credit cards seems like bad financial advice!
I agree that using credit cards to buy things you can't afford can lead to financial disaster. Even if you can make the minimum payment on a credit card balance, it can take around 20 years to pay off a credit card debt! Over this time, the interest charges keep on piling up and you end up paying a very high price for whatever it was that you charged 20 years ago...
But that is not how I suggest using credit cards as part of a smart personal finance strategy. I merely suggest taking advantage of the perks of using credit cards without paying anything. How can you do this? Easy- just pay your balance in full every month (or actually more like 25 days with most cards now).
For example, I was at Target with my wife buying some grocery items. My wife had enough cash in her purse to pay for the items. I had enough cash in my wallet to pay for the items. But I whipped out a credit card to pay. Why!?
Because I could save 5% off my purchase by using my Target card. When the Target bill comes, I will pay the balance using the electronic bill pay feature from my credit union. The result is that I just saved 5% and it didn't cost me anything.
I do the same thing at Lowes by using my Lowes credit card to save 5% on everything I buy there. As long as you don't buy more stuff than you otherwise were planning to buy and pay your balance every billing cycle, you really do save 5%.
I sometimes use a credit card with rewards to make other purchases. With the rewards on my credit card, I can get pretty much anything I want from Amazon for free.
So when I say to use credit cards, I mean to use them to save money- not to spend money!
Here is one of my statements about using credit cards that caused a kerfuffle:
Tip 15: Use Credit Cards