Everyone has a different take on credit cards.
Some people here do interest rate arbitrage. In other words take the 0% and park the money in a savings or money market account earning 4% - 5%. They pocket the interest minus any transfer fees.
Other people here declare credit cards as pure evil and say the first thing is to get rid of them. Melt them, chop them, dip them in liquid nitrogen and shatter them, let the dog chew them up, or all of the above.
My take is some where in the middle. In today’s society, I think that it’s impractical to make every purchase in cash. Do you pay your electric bill in cash or your mortgage?
So for example, my cable, phone, internet is about $160 a month. I have it as a line item in my budget. When I get my first paycheck of the month, I fund that item. Does it really matter how I pay for it? Cash, check, debit card, credit card? The item is already funded. For all purposes, that money is already sent.
What advantage do I get? I get to float the payment for a few weeks (a few pennies). I build up my credit score, using credit responsibly. I also get points or cash back.
The argument is that it’s easy to charge more than you budgeted. Isn’t also easy to write checks when there is no money in your account. You say no? Why? Is it because you have a different mindset around credit cards. In other words, it’s ok to overspend credit cards but not your bank account.
My point. Change your mindset, follow your budget, and enjoy the perks. Never spend more then you funded and the payment option won’t matter.
But after saying all this, there are some people who can’t control their spending. And maybe cash only is the way to go. But I think this population is pretty small and if you budget and are mindful of the budget, you should have no problems. And maybe turn those points into gift cards you can sell on Ebay or Craigslist for the $20 challenge.
Credit cards: A necessary evil?
December 18th, 2007 at 03:09 pm
December 18th, 2007 at 03:20 pm 1197991246
But really, I agree. I never understand those articles about you spend more on credit and blahblahblah. I don't treat my credit card any different than a bank account. You are right. It is just your mindset.
December 18th, 2007 at 03:22 pm 1197991357
Thank for the entry.
December 18th, 2007 at 03:34 pm 1197992050
December 18th, 2007 at 03:39 pm 1197992344
I think part of the problem is over-simplistic preaching from some "finance gurus" with half-baked messages that manage to reach a relatively large portion of the masses that are willing to buy it without question.
And you know what, I'm just going to say it: While I don't think Dave Ramsey's advocacy against credit card is a bad thing when you're starting out, deep in debt, and you just want things to get better. However, once you're out of debt and have a better mindset as you put it, then to not use credit cards to your advantage is to deny yourself the opportunity to create a better financial world for yourself.
To me, credit cards are like fire. If you don't apply it correctly, then yes, you will get burned and it may be best to avoid it for now. Use it correctly, however, great advances can be made towards your financial empire.
December 18th, 2007 at 05:13 pm 1197997983
My credit card gives me a 0% interest line of credit with up to a 50-day grace period on charges AND pays me to use it in the form of rewards. How could I pass that up?
December 18th, 2007 at 08:40 pm 1198010440
December 18th, 2007 at 10:00 pm 1198015219