When shopping with a credit card, consumers spend an average of 18% more than they would while paying with cash or a debit card. And no wonder: Credit cards are convenient to use, and technically they allow you to spend someone else's money. That makes them potentially dangerous for people who tend to fall short of budgeting goals. But for those who keep a closer eye on their credit budgets, how frequently should they pay off their card balances?
In the previously recorded Facebook Live video below, Motley Fool analysts Michael Douglass and Nathan Hamilton answer a user-submitted question about strategies to pay off balances and manage debt levels better.
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Michael Douglass: Ryan asks, "Is there any harm in using your credit card for every single purchase and paying it off immediately thereafter?" The way I'm interpreting that is, buy movie tickets on the credit card, pay off the credit card balance that night.
Nathan Hamilton: If there is any harm, then I'm doing a bunch of harm myself, because that's how I treat my credit cards. Now, I don't pay them off every day, there's no impact there.
Douglass: There's a level of work that requires, effort that I would much rather put toward something like doing the dishes.
Hamilton: Yeah. But, getting at his question, using your credit card for normal charges like gas, tickets, entertainment, dining, everything, and earning rewards and paying off your balances, whether you do it every day, every ten days, if you do it once a month before the due date, you're not going to incur interest charges. Definitely, that is something that we advocate for. If you are earning credit card rewards, I don't see any sense in spending to earn rewards and getting charged interest at far higher rates.
Douglass: Yeah. You're making 2%, but you're spending 20%, which means you're losing money.
Hamilton: Yeah. There's no way he's going to harm himself by paying off those transactions.
Douglass: That said, take a night off. Maybe do it once a week or something. Give yourself a little bit of free time