We hear a lot from the debt-free community on why credit cards are always bad. But are they? My answer? And you may want to learn more by reading my story below.
I got my first credit card when I was 32. Even when we were going through hard times, we didn’t have credit cards, which prevented us from going into consumer debt while we learned the key to financial success.
While it is possible to go through life with zero credit history, and some people who I greatly admire have done it, knowing that we may eventually need to have a home mortgage, I decided that I wanted to build some credit.
First, a little history
When I was ten, my parents decided to get completely out of debt and live exclusively on a cash budget. I don’t think they had any credit card debt at that point, but they tore up their credit cards anyway.
And from that moment, they ingrained in us kids the value of a debt-free lifestyle.
It’s a lifestyle I’ve lived from day one. Though I’ve mentioned that we went through some pretty tough times, and during that, Gabe’s cattle business went into debt, so technically, I have had debt in some sense; I usually forget and still think of myself as having been exclusively debt-free from birth because I wasn’t involved in the business other than helping with the cows themselves, and didn’t know about the debt until afterward.
But after getting completely out of the cattle business, building up our financial stability a little bit, and learning a lot more about managing and investing money, I started thinking about credit cards.
Why? Officially, so I could build up some credit should the need arise to buy a house before we had the full amount saved up (i.e., if something happens to the old mobile home we’re currently in).
Unofficially, because I started reading about reward travel.
I found a blog, and then a Facebook group, and then another and another, talking about these fancy credit cards that allow you to earn points when you spend money. Airline miles for some, hotel credit for others.
As someone who has always wanted to travel the world, that really appealed to me. And as a very frugal person who uses Swagbucks, Rakuten, and Ibotta regularly to make sure I’m getting the max out of every dollar, I felt like by not using these cards, I might be leaving money on the table.
But I very quickly found out that a person with zero credit history won’t get approved for a great rewards card.
So I decided to get an entry-level Capital One card and learn more about this reward travel thing when I actually had the credit to get a rewards card. Y’all, I had to make a security deposit to get my first credit card.
After having the Capital One card for a while (and getting my deposit back and getting my credit limit raised a time or two), I decided to look back into rewards cards.
And quickly became confused.
It was a world of “get this card with this points system, then roll those points into another card and close out the first card,” etc., etc.
Some of these people are so dedicated rewards travel is almost like a full-time job!
So I decided to leave it alone.
There wasn’t much point in using my no-rewards Capital One card, so I virtually stopped using it.
And then, one day, I was making a hotel reservation, and as I was checking out, got an offer for the Wyndham Rewards card, and I thought, hey, why not?
Maybe I wouldn’t be a top-notch rewards travel guru, but if I could get 2 points back for every dollar I spend on groceries, maybe I could earn a free hotel stay here and there.
So I applied and, to my surprise, got approved.
And now? Well, I use what I now know is a low-level rewards card for every purchase I can because, you know what? I don’t care if it’s low-level. It earns me free hotel stays, which is amazing when I’m driving 800 miles one way to visit family.
So are all credit cards bad?
Obviously, I don’t think so.
Credit cards are amoral. They have no soul.
The good or the bad happens in what you do with them.
It’s really an individual decision.
Can you have a credit card and stay out of debt?
There’s no shame in saying no to credit cards to keep yourself on the right financial path. In fact, just the opposite. That’s bravery. That’s standing firm in what you believe in.
But are you the kind of person who can stay on your target budget while using your credit card to pay for thingsand pay that card off every month without fail?
Then go for it! Take advantage of the system and earn those rewards!
My Experience with credit cards so far
So far, my two credit card experiences are the no-rewards Capital One card and the Barclay’s Wyndham Rewards Visa card.
Capital One’s app is very easy to use, and they make it easy to pay off the full amount every single month with just the tap of a finger. Something I took for granted until I got my second card.
Barclay’s app is similar to Capital One with an exception: They really don’t want you to pay the full bill. Like, really, really. And I get it – they make their money off of people paying interest on their debt. Credit cards aren’t evil, but maybe credit card companies are just a little bit.
Anyway, you can look at the full amount owed, tap over to “pay bill,” select “custom payment,” and then enter the full amount (which I’ve already forgotten, so I have to go back and look again), so it’s not a huge deal, it’s just not easy like it is with Capital One.
Are the points worth a lot? Not really. It takes several thousand points for a free hotel stay or about 1,500 for a greatly reduced hotel stay, which is what I usually do. So far, I’ve averaged earning just over a thousand points each month using it for as many household expenses as I can (it’s specifically against the terms of use to use it for business expenses).
Set Yourself Up for Credit Card Success
If you choose to have a credit card, here are a few tips for getting the most out of it:
- Keep a close eye on your spending. One of the reasons so many financial gurus recommend against them is that credit cards are easy to overspend on. So keep an eye on it. Most credit cards have an app that makes this easy.
- Treat it like a cash envelope. If you’re familiar with Dave Ramsey, then you know his cash envelope system of allotting a certain amount of cash to each budget category and putting it in labeled cash envelopes to prevent overspending. With a credit card, you have no physical limit, so it takes self-discipline to make sure you don’t slide that card when you shouldn’t. But you can do it. You can pretend there’s an $80 limit on your card when you walk into the store.
- Pay it off in full every. single. month. This is non-negotiable. I don’t care how many points you can earn; carrying credit card debt is never worth it. Either stay out of debt or cut up your cards. And do not use your credit card if you don’t have money in the bank to cover it.
