Why I Use Credit Cards
You’re probably wondering why a broke grad student is writing about using credit cards. Some might say that using credit cards is just asking for trouble, and in many cases it’s true. However, I think choosing whether or not to use credit cards is a personal decision that requires serious self evaluation. This means being honest with yourself about your spending habits and acknowledging the risk of using credit cards. Here’s my take on the the subject.
Before I started regularly using credit cards, I asked myself the following questions:
- Do I remember to pay off my balances on time?
- Do I have enough self control to avoid buying things I can’t afford?
- Are the benefits I’m getting from using credit cards worth the risk of going into debt?
If the answer is a definitive “yes” to all three, then I’d say you would probably be fine using credit cards. However, if there’s any hint of doubt when answering those questions, I would sit down and ask myself again if I really think it’s worth the risk before actually getting a credit card.
I answered “yes” to all three questions and started using credit cards a few years ago. In fact, I use credit cards for almost all of my purchases now because:
- I pay off the full balance every month
- I never charge more than I can pay back
- I get discounts on required expenses (5% cash back on gas, etc.)
I realize that this definitely isn’t the norm among credit card users. The credit card companies have to make money somehow. They’d be out of business if everyone used credit cards like I do, but people don’t. Like I said before, I think the decision is up to you, and I think the best way to make it is to sit down and honestly evaluate your spending habits. If you think it is worth the risk and decide to get a credit card, you have to be willing to accept the consequences if you make a mistake.
I have friends who refuse to use credit, and they’ve stayed out of debt because they only spend the cash they have. This is definitely the safest option, but it also has small rewards. Other friends have some major credit card debt, and they probably shouldn’t be using credit cards at all. And some friends, like me, use credit cards to buy almost everything. I have no credit card debt, and I’ve saved hundred dollars on groceries and gas along the way.
I think there are two groups: people who can handle credit cards and people who can’t. The trick is identifying which group you are in and making smart decisions based on your evaluation.
What group do you fall under?
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{ 14 comments… read them below or add one }
One thing I would add to your already good approach on using credit cards correctly is: “I do not spend more money when I use credit cards for my purchases when compared to cash”
[...] Grad Student presents Why I Use Credit Cards — A good approach to using credit cards [...]
Definitely a credit card user. I do not spend cash I don’t have and I don’t spend cash I wouldn’t anyway. I max out our retirement and have no debt. We bought a condo in Southern CA while graduate students. I don’t think we’re bad with money.
That is a very mature attitude. Kudos to you!
Friday when I run down the articles I most enjoyed from the Carnival of Personal Finance #127, I plan to provide a link to yours.
Best Wishes,
D4L
Credit cards don’t have to be evil. It’s how they are used and the fact that people are irresponsible with them that make credit cards bad. I’m one who can now handle credit cards. In the past I wasn’t. Great article!
[...] Why I Use Credit Cards [...]
I’m a credit card user as well…I put everything I can on a rewards card, pay it off at the end of the month and pocket the reward money. If you’re going to spend the money anyway, might as well get something back.
[...] also been leaving some great comments on my posts. To top it off, he selected my article on Why I Use Credit Cards as an Editor’s Pick! Given that Pinyo chose Wonders of World as this week’s theme, [...]
Interesting discussion. I’ve never had a problem over-spending on my credit cards, but I choose to pay cash anyway. I actually wrote an article on this today:
Five Reasons To Always Pay With Cash
I think I belong to a different group: I’m in debt, a lot of debt, more than $30000 in credit card debt!
But, hear me out, I’m milking the credit card companies, for a change. I max out all the cards I have while they’re offering 0% or under 3% APR balance transfer, then I wrote myself big fat checks (making sure I read the fine print of course). Then I turned around and invested the money. I am betting that my investment returns will be greater than 3% or so. I could lose money, but I think it’s a bet worth placing. Yes, I paid transaction fees, but all financial undertaking has to start with some capital, and you pay for the privilege to use that capital.
Otherwise, I have been building a good credit (over 710 points). Until I started to milk these companies for investment capital, I always paid the full balance on time without fail. I buy most things with my cards. I won’t advise most people to do what I’m doing, however (I wouldn’t even let my brother know because it could backfire).
‘Poor Student’ does represent a different kind of credit card users, and I consider myself in this category.
One of the credit card company that I have an account with sends me convince checks with 0% APR almost every six months, it is like clock work. I make these checks to myself and invest it.
Investing in a 5% C.D. could be a safe investments for starters.
When I have borrow money from this credit card, I only pay the minimum balance for the life of the loan and then pay it off in full when the 0% rate is no longer good and interest jumps.
More seasoned investors can try their luck in the stock market with this money.
However this will only work for individuals that have a good financial discipline and will not use this money to buy do-dads.
I pay all my other credit cards in full at the end of every billing cycle.
I have been mostly a credit card user last year. But now I’m trying to minimize the use of it. I’ve read in some book that using more than 35% of your credit limit will hurt your credit score even if you pay it in full every month. I still use my credit cards but I only limit the charges to $20 to $30 monthly. So when the due date comes, I know I can afford it… and at least I’m still building my credit score that way.
[...] work only accepted cash. This was quite an adjustment for me when I first started working, because I use credit cards to pay for almost everything. While I eventually got into the habit of making a weekly trip to the [...]
I’m the same “Poor Student” who wrote above a few months ago. I just want to give you guys an update. I don’t want to go into details, but take my word for it: do NOT borrow money to invest in the stock market under any circumstances. It’s a bad idea. Do it at your peril.
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