No Credit Cards vs. Credit Card Savvy

[henrybemis]

I'm curious to hear others' thoughts on not owning or using credit cards versus a perceived advantage of using reward based credit cards in a savvy way, such as buying things to get the cc rewards (cash back, travel mileage, etc.) and immediately 'prepaying' after each savvy purchase by transfering money to your cc account.

Thanks

[terry1156]

I personally think that credit cards are great for me because I take advantage of all the things they offer and I pay off my bill in full each month. I earn a free international round trip ticket at a minimum every year with my airline card, but I also only use it to buy things I would have bought with cash if I didn't have a credit card.

I also think that using a credit card properly will save you on car insurance, home loans and other similar things due to a better credit rating.

If you can't control yourself with the credit card, I think they can be a disaster and even with all the benefits they can provide, you're better off not having one if this is the case.

[DivaJen]

Ditto to what terry said.

I think your idea of moving money to a credit card account is an interesting idea. Might help people really feel what their spending if they have to watch their checking account go down after each swipe of the cc.

[jhd815]

I believe that it's not the credit cards in and of themselves that create debt problems but rather how people use their credit which is the problem.

In some ways, cc's are a "necessary evil" in order to establish a credit rating which helps you qualify for car and home loans, etc. CC's can also be used in such a way that they "reward" the cardholder.

If you are able to pay off your balance in full each month, and not pay an annual fee, then a cc which offers some type of reward is a great deal.

On the other hand, if you view a cc as a way to purchase whatever you want whenever you want you will be spinning in the web of cc debt until the day you die.

One of my simple joys in life is knowing that a certain cc company is not making any money off of me because I pay the (small) balance in full each month.

[genchan]

I don't particularly like credit cards, but I don't know how people can live without them. I buy a number of items on the Internet each year and there is no way to do that without a credit card in most cases.

[asrai]

It has been shown that most people when using a credit card spend more then when they use cash. Can't remember where I read that.

In the US and some banks in Canada you can get a credit card (has the Visa or Mastercard logo on it) but works like a debit card (the money goes right out of your account) but that way you are protected for fraud and the like (unless it is used at an ATM with a pin).

[singinjeannie]

When you use a credit card, you will most likely spend more money than if you had been using cash. That's a proven theory. In some cases, a lot more.

For purchases on the internet, you can use a debit card. I even find when using a debit card, I overspend at the Supermarket. If I have cash in my pocket -- and only cash, I spend approximately 30% less than if I use a debit card. It's too easy to say, "Oh, I'll get this and this and this and this and -- I know I have enough in teh checking account to cover it!"

I've gone to the envelope system and don't use debit or CC anymore. I don't trust myself!

If you can really be self-controlled, I guess it's okay. But I know I really can't!

(PS - I do use debit cards at the gas station as I have little ones and don't want to have to go inside to pay.)

-Jean

[Armywife]

A good friend of mine who lives on base showed me how she handles finances monthly. She's a single mom with 5 kids and still manages to save a lot of money after all the bills and teenage angst trickle down the line. I found three points very interesting and have vowed to try it out myself:

1. She buys all groceries, prescriptions, etc. with her Discover card then Pays in full at the end of the month. The money she gets back is then put in a savings account religiously.

2. She uses a different card for Gasoline which pays a higher percentage cashback (again, her money is put into a savings account).

3. She pays certain fixed bills with credit cards and gets a smaller amount (like five bucks) but then again, anything is better than ZERO the old fashioned way, right?

I guess it all depends on the individual's will power and patience since it feels like an eternity when you go from paycheck to paycheck. It is nice to see how different strokes pay off for different folks

Barb
3.