Why you might use a credit card

If you spend very much time around people who are trying to get out of debt, you are likely to encounter the topic of credit cards. A lot of people will tell you that going anywhere near these forms of “magic money” is a really bad idea, while others will say that, with a little bit of self-control, you would be dumb not to use them. So, what’s the answer? Should you use a credit card? Please note, this post is a follow up to another article discussing why you shouldn’t use a credit card. Think of it as a debate…

Reasons to consider using a credit card

Many people who are trying to get out of debt choose to keep a credit card as the source for their emergency fund. Usually, the argument here is that it might be better use any money available to pay off debt with the possibility of borrowing money that you can pay off before acquiring interest. Then again, a lot of people keep a small emergency fund in the area of $1-2,000 dollars and worry that, given a “real” emergency, that might not be enough. These people often choose to keep a credit card available only for catastrophic emergencies.

Many credit cards offer rewards. Why would you choose to use a debit card when you can use a credit card, spend the same amount of money, and get something extra for free? Credit cards are happy to offer you anything from airline miles to cash back. And if you pay the card in full every month, you don’t get charged interest. It’s also argued that it makes more sense to earn bank interest from your checking account while you are borrowing money interest-free from the credit card company.

Speaking of using a credit card vs. using a debit card, you might realize that the study showing that people tend to spend more with a credit card than they do with cash probably applies to debit cards as well. If you’re prone to spend twice as much at a vending machine due to the ease of access to funds with a credit card, wouldn’t you be prone to spend just as much with a debit card. On this front, it seems that you would have to use cash only if you want to support this claim.

One other note on debit cards is that many banks offer “free” overdraft protection so you don’t have to face the embarrassment of having your card declined at the checkout stand. Of course, this often comes with a $25 or more fee for overdrafting your account! For many, even having interest payments on a credit card is less expensive than paying these overdraft fees.

The point of the matter

So, what’s the verdict? Should you use credit cards or not? That’s really a personal decision for your own finances. Personally, I do use credit cards – responsibly. To be honest, however, it is a choice that I rethink pretty regularly and just might change in the future.

Want more info? Check out the other side of the argument.

Do you think it is possible to use credit cards responsibly? What do you think about my choice to use them? Any other thoughts or opinions on the matter? Feel free to comment below!

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