Welcome to the 7th Smart Money Debate at ReadyForZero! To see the other side of this debate, read Kurt’s post: Cash Is Still King! (Why You Should Use Cash Instead of Credit Cards). And then let us know which argument was more convincing!
This post was written by the author of TeachHerFinance.org, a personal finance blog from the perspective of a 20-something teacher living in Washington, D.C. You can find her on Twitter @teacherfinance.
There are few personal finance topics more hotly debated than the one surrounding the use of credit cards. Pundits and bloggers usually have very strong views about whether credit cards are a convenient tool for building credit or a gimmick to trap consumers in a cycle of high-interest debt. I’m one of those bloggers, and I come down firmly on the side of using rewards credit cards over cash for day-to-day purchases.
Now, I must confess that I’ve gotten myself into some pretty serious trouble with credit cards in the past. When I was in graduate school , I managed to rack up about $5,500 on my credit card, which took me over two years to pay off once I was working. While I was in repayment mode, I didn’t use the card. I used only cash to be sure that I wasn’t adding any additional debt to my staggering balance. But as soon as the card was paid off and I had moved on to chipping away at my other debts, I said buh-bye to cash and went back to using my card for every purchase I could. Here’s why:
Using credit cards over cash is beneficial for a lot of reasons, but to me the number one reason to use a credit card for every purchase that you can is the rewards. I personally have a cash-back credit card, and once I’ve “earned” at least $50, my credit card company sends me a check in the mail. As far as I’m concerned, that’s free money! There are lots of different types of rewards you can get from your credit card, so be sure to shop around for the reward you think you’d use most.
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When I was using only cash for all my purchases I worried constantly about losing money, or it getting stolen. Simply put, cash offers absolutely no security. People who are anti-credit card usually counter that using a debit card is just as secure as using a credit card, but without the risk of digging yourself into debt. The problem is, if your debit card gets stolen or you get double charged for something (it’s happened to me twice with my debit card) that money is gone until you realize it. Yes, your bank will straighten it out eventually, but what if you have other bills scheduled to get paid from your checking account and you end up with a couple hundred in overdraft fees (again, happened to me twice)? It’s a headache you just don’t need. Credit cards are much more secure than cash or debit, no matter what the scenario.
Simply put, having to carry cash around is massively inconvenient. You have to stop at ATMs, but of course, only your bank’s ATM because you don’t want to pay any fees. You have to be sure you’re getting enough at a time or you’ll just have to go back. You have to fumble around with change at the register. It’s so much more convenient to just swipe a credit card and be on your way. Maybe this is my lazy side coming out, but I find paying for day-to-day stuff with cash to be way too much trouble.
The Maintenance of My Credit Score
Some day, I’m hoping to be completely debt free. No student loans, no car loans, no debt whatsoever. That day will be glorious, but at the same time I want to be sure that I hold on to all of my options. If I had absolutely no open credit accounts, my FICO score would eventually suffer. By using my credit card consistently, I’m able to maintain a good credit score so that if I want to apply for a mortgage or other type of loan in the future, I’m able to do so with no problem.
Again, as someone who’s been a cash-only spender in the past, I’m very convinced of the value of using credit cards for day-to-day purchases. While I’ve been in credit card debt in the past and know how difficult it is to climb out of, I never once blamed the credit card for putting me into that debt. I was the one who spent irresponsibly, I just happened to do so using a credit card. You are in control of what you buy, so do it wisely.
I hope I’ve convinced you that using a rewards credit card is the way to go for your day-to-day purchases!
To see the other side of this debate, read Kurt’s post: Cash Is Still King! (Why You Should Use Cash Instead of Credit Cards). And then let us know which argument was more convincing!
Image credit: tadija