Once you learn to harness the power of credit cards, it's easy to make them work for you.
Digging yourself out of credit card debt is not easy. And once you've done so, one of three things can happen.
- Wiser for the experience, you move forward, carefully utilizing credit when needed.
- Slaphappy at the thought of being debt-free, you begin charging anything that appeals to you at the moment.
- So scarred by the experience (like me), you roll into a metaphorical fetal position and treat credit cards like a scorpion poised to strike.
Credit card trouble
My husband and I had credit card trouble over a decade ago, and it took me until early 2020 to wade back into the credit card pool.
We had been overly optimistic about the future and then had to deal with the expense of fighting a serious illness. And while I would not blame anyone else who landed in debt for the same reasons, I still carried a sense of shame.
Maybe if I'd paid more attention to what was happening to the economy, I would have paid those cards off early. Perhaps if I'd built a larger emergency fund, I would not have depended on credit cards to stay ahead of medical bills. But guilt is a useless emotion when it comes to finances. In fact, being driven by any emotion while making financial decisions is unwise.
My inability to use credit cards for the better part of a decade was not without cost. We didn't collect a single credit card reward point during that time. We never took advantage of a 0% promotional offer. And we didn't get any credit card sign up bonuses.
Perhaps most importantly, locking those cards away made me believe something about myself that was not true -- that if I'd become a slave to debt if I ever used a credit card again.
My husband has spent much of the last decade traveling the globe for work. Although he paid off the card used for travel the moment he was reimbursed by his company, I still worried. My unwillingness to use credit made life more difficult for both of us.
It took years to shake the memory of how heavy credit card debt once felt. By the time I was ready to reintroduce them into our everyday lives, I needed some guardrails. The following principles allowed me to feel secure using credit cards again.
Use one card at a time. When we used a card with a 0% promotional rate to have hardwood laid in our home, we didn't use any other credit cards until that card was paid off.
Pay the credit card bill in full every two weeks. Today, we use our favorite rewards card to pay for everyday expenses like gas and groceries -- and even haircuts. Rather than run the balance up, I set a reminder to pay it off every other week. In fact, sometimes (like around Christmas), I pay it off every week. This may not work for everyone, but for me, it feels like I'm controlling the card.
Check credit card accounts twice a month. I realize this sounds obsessive, but I do a quick run-through to make sure nothing unexpected has been posted. This can be a useful way to track infrequent charges like a toll pass or spot fraud. In total, that peace of mind costs me less than five minutes.
Never pay interest. We now use a credit card to pay for everyday expenses, but we don't charge anything we can't pay off before the billing cycle is up. Using a credit card would not work for us if we had to pay interest. Again, the goal is to use the credit card rather than allow it to use us.
Benefits of using credit cards
I know only too well how easy it is to get into trouble with credit cards. But now that I've been following these rules for a year, I can appreciate the benefits. For example:
- Using the same card for everyday purchases makes it easy to see where we spent money and what we spent it on.
- Paying the card off in full more than once a month offers more opportunities to watch our rewards points pile up.
- Rewards points save us money. Our current favorite card is associated with an airline, which works well for our situation. My husband travels extensively with his job and pays for all flights with the same card. So far, the rewards points have paid for several flights, numerous flight changes, and have earned him status with the airline. This status allows me to fly with him for $5, which will be a pretty great perk once the pandemic passes and I can fly again.
Your mileage may vary
To be clear, credit cards may not be the right financial instrument for you. If you are a compulsive spender (or married to one), might not be able to pay your balance off in full each month, or are concerned about your debt-to-income (DTI) ratio, a credit card might not make sense. I'm no longer afraid of credit cards, but I do have a healthy respect for how dangerous they can be.
Today, I see similarities between credit cards and calories: Some people consider them necessary, and some consider them the enemy. It took me years to figure out that harnessing the power of credit cards without becoming a slave to them gives me financial confidence -- confidence I can carry into all aspects of money management.
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