Can credit cards be a GOOD idea?

[Haku]

I saw in another thread where people suggested paying everything in cash. Before I continue, I want to state that for years and years up until very recently, I have done exactly that. I've run into credit card debt before, and I have learned to despise such abominations. Paying cash is perfectly dandy with me.

But recently, I was thinking about getting back into the game. This time though, I only care about getting a fairly low balance one ($500) and paying it off, in full, each and every month. Doing so should provide me with the following:

1. Protection from fraud in that it isn't tied to any of my bank accounts.
2. Helps rebuild my credit rating.
3. Have the ultimate goal of ending up with a cash back type where I can save even more when I do spend.

Naturally, I will have to be financially disciplined and not view the credit card as "free money". I can do all that, and if I do this, it should not change any my regular spending habits at all.

I suppose what I'm wondering is if my logic is flawed in any way. Is it even worth doing this? If not, I'm perfectly fine with paying everything in cash. What do you think?

[CJsoccerchic]

I use my credit cards for the free airmiles, so I'm a fan of the card!

[Thrifty Ray]

I think 'discipline' is a key concern.

I have a cash rewards card...and I use it for everything. Gas, groceries, doctor bills, misc, etc. (However, 'everything' is budgeted for- otherwise, I don't buy/spend)

Each week, I make an electronic payment and pay the card off.

When my points reach $20, I request a check.

Pretty easy money. Love it!

However, if I wasn't disciplined, this whole system could easily turn into debt---which would grow into more debt- which is what gets so many folks in financial trouble.

I do feel that a rewards card can be beneficial for the reasons you listed...so long as it is used wisely and you stick to the plan.

[boefixepa]

I use the CC to make money. This doesn't work if you don't have self-disipline and a system of keeping track of everything. I use Mvelopes and it allows me to do this with ease. I use the CC like a debt card for my everyday normal expenses and stay within my budget. I basically use one or two CC at a time. One is my good old stand-by and the other is the current "interest free for 18 months" card. Those are the only ones I would consider getting. Because of a really great credit rating I get really stupid limits...like 8.5 K to 10K!! So I take this "interest free" credit card and use it like a debt card. Generally between the bills I can pay with it, gas, food, meds and such I can put about 1K a month on it. I just pay 50 to 100 a month to stay in good standing and keep the interest free going. I then transfer that 1,000 to 1,500 a month into my 4% ING savings account (eventually to a CD for even better 5%, but I just started the ING thing thanks to this site!!!) and let it sit there for the duration of the interest free period. Just before I am charged interest I pay it off lock stock and barrel and start over with a new card. I make a few hundred dollars a year doing this. PLUS I get the points for either cash back, gift certificates, frequent flyer miles. For me I love it!!! I spent years hating CC and crying at the interest I was paying. Now I feel like I'm getting my money back!!!

It's really all a matter of self-disipline. But I feel it's high time I start earning interest instead of paying it. This was just one of many baby steps for me and it was a hard one for me to take. Start of with the small steps and build up if you have to. But it is worth it and it really helps your credit rating IMO.

Have Fun,
Boefixepa

[sakigt]

Paying cash for everything will cost you in the end when you NEED to finance something like a house (unless you plan on paying cash for one!)

As it was said before discipline is the key. I used my Discover card all the time, but I pay off the balance each month. I wouldnt have gotten such a good rate on my home w/o my credit cards!

[Haku]

Yes, I can do discipline. I'm ready.

[abowers]

my boyfriend's parents get borders rewards for using their credit card -- and they used their credit card to pay for tuition for all three of their sons' tuition -- good thing they read a lot.

another friend of mine -- her parents did the same thing, but for airmiles, with 4 kids' tuition.

[zakity]

We do a variation of this. We put everything on credit card and pay it off every month. We get points and can do various things with the points. Usually, I get gift cards to either Home Depot or to a restaurant that my Mom's-Night-Out is at. I have a spreadsheet that I keep track of the bills on and I have a column for the credit card. Any time we use the card, I record it. I don't break it down into categories on the spreadsheet, but it could be easily done.

[spendless]

Sounds to me that you are ready to utilize CC's to your advantage and to do so with discipline.

Good luck. Done correctly, your credit scores will benefit as well.

[Ima saver]

I pay my card off each month and I don't charge much. My card has an $18,000 limit and I seldom have more than $200 on it, so that is good for my credit report.
My husband charges his building materials at home depot and we pay the bill off each month. He accumulates cash back on his card and they credit that once a year. This year we will get more than $500 back from his credit card.
Just be careful to never be late, even once.

[cicy33]

Very good point, if you are late that interest free card just went to 18% or higher

[Ima saver]

Also, if you are late, even once, you lose all the cash value that you build up. Since I pay by mail, I mail the payment right away and check my checking acct. everyday to make sure the payment went thru.

[jmjj215]

Ima, when are you going to just pay online? It's oh so much easier

To the OP - if you're operating on a monthly budget, where that is the guiding force for your purchase decisions, using a CC for rewards is fine by me.

An article I wrote recently...

[Lemony]

If you've been disciplined enough to do cash only for a significant amount of time, you should be ready to dip back into the credit card game. We had to stop using credit cards for a full 6 months before we came to our senses about budgeting and finance. Now we've come full circle and use a cashback rewards card for everything and PIF. All of our banking is done either online, or with credit or debit cards.

We credit our 6 months of cash-only with smartening us back up, but we definitely feel more secure using plastic.

[kealina]

i think you sound ready... it's really not that hard as long as you don't get sucked in... we use ours like a debit card for gas, groceries, etc.... and pay it off online weekly... we're building points although we have no idea what we're gonna do with them.... if i could pick i definately like cash, gift cards or airline miles.... =)

[lsdlsd0]

Credit cards are great. Anybody who says otherwise doesn't know what they are talking about :P

Just follow this simple plan:

"Don't buy stuff you can't afford"

link to SNL skit

[Haku]

Thank you all for the advice. I've been paying cash/debit for more than 5 years now. I do just fine without it, but credit cards are not without its benefits. So, now that my personal finances have stabilized, I figure it's time to get back into it.