“What!? Credit cards?!? HTF can you love pure evil in the form of plastic?????”
It's actually kinda simple for me. I like the rewards (aka sorta free stuff).
I'm currently sitting in the airport on my way to Boston for a cool meeting with Fidelity Investments (#humblebrag). My flight was delayed and I had to switch to a WAY later flight. I'm going on hour 6 here now. Jet Blue is literally tweetING AT ME TO MAKE ME FEEL BETTER:
…I will take that gold star thank you very much.
I'm writing out of pure boredom at this point, so credit cards it is!
In all seriousness, I personally think credit cards are a sneakily awesome financial tool for young people. I'm probably in the same boat as a lot of Millennials who were lectured by their parents about using credit cards.
My parents hit me with all sorts of horror stories about buying furniture on credit cards when they were young, getting crushed by the high interest, general stories of getting screwed over, etc. I actually really appreciate that they told me about it. You should be scared as hell of credit cards. But like…a healthy scared. I'll explain below.
Here are 4 reasons I use credit cards instead of debit cards:
1) As previously mentioned…the rewards!
Cash back, points, travel offers…whatever. I like them all. Personally I have a travel credit card and a business credit card that gives me points on lots of different purchases. To maximize our points/rewards, my wife and I put all of our monthly expenses (minus rent) on the travel credit card and all my business expenses go on the gold card.
I've picked up enough points over the past few months that I can take her on a cool wine-tasting tour for our one-year anniversary in a few months…fo' free! The points accumulate REALLY quickly when you use your card for basically everything.
2) Security
Two weeks ago I went out to eat (*GASP* personal finance blogger treason!), and when I got home my credit card company called me and said someone else tried to buy – get this – $270 of pizza with my card information. The restaurant I went to got hacked and my info got stolen by what I can only assume are people in Colorado. Bummer.
The card company cancelled the charge immediately (sucks for the hungry pizza people) and overnighted a new card to me. Had it been a debit card, I may have been screwed.
3) Rental Car Insurance
Seems random, I know. But have you ever rented a freaking car before? They try to hit you with all these extra charges for their insurance. My travel card has sufficient insurance for car rentals, so I just say no to the person across the counter and go along my merry way (and keep some cash in my pocket).
4) Building Credit
As some of you know, I used to have crappy credit. Fortunately I was able to use my credit card and basically game the credit reporting system which you can read about here. If you keep your credit utilization low, revolving credit (credit cards) can actually help boost your score! Higher credit scores also mean lower interest rates later on, and more money in your pocket. I know you like that.
When should you use a debit card?
- If you suck at paying the full credit card balance off every payment period – the interest rates are unbelievably high (usually) and can get you into a ton of trouble quickly
- ATM access
That's it. Actually I'm kinda kidding, but I really can't think of many reasons to use a debit card instead of a credit card for everyday spending.
Why do you like (or dislike) credit cards? Are debit cards or cash the way to go?
I stopped using credit cards when I got serious about paying off my student loan debt. I was always pretty disciplined with my credit cards, but while I’m trying to get out of debt I don’t want to risk slipping into more debt by using credit cards. You do bring up some good reasons to use credit cards though. Especially for security. I’ve heard that if you run your debit card as credit that you get the same protection? Any idea if that’s true?
I can run my debit card as credit, but it’s more about the reliability of the credit card company to fight fraud on my behalf that I like.
Nice work getting out of student loan debt, I’m rooting for you!!!! 🙂
So what happened to reason #5? I love cards too. I’ve been into getting the sign up bonuses lately.
I have no idea what you are talking about 😉 – I got a pretty sweet sign-up point balance with my business card that I still haven’t used yet!
Thank you!
I’m team credit cards all the way. Protection is huge. I’ve had 3 counts of credit card fraud and one dose of debit card fraud — debit card fraud is much more of a nightmare because they get your real money! It’s gone… Granted, my bank put the $600 back, but still. Terrifying.
Also a perk to be at a high 700 credit score (broke into 800 once, and then applied for a card to churn those sweet, sweet miles) but never once paid a penny of interest! I also have no other debt, so credit cards are the only way for me to get a solid credit score.
I literally have never had a time where I didn’t feel comfortable/safe using my credit card. I used to have a 580 credit score and brought it back to the mid 700’s just by managing my credit cards (don’t have any other debt either). Really really good tool if you use it right.
Another great reason is the end of year tracking. Nothing like having an itemized list of all your spending to help with budgeting/cutting out a bunch of crap!
Have you checked out Abraoders.com for travel card management? I’ve never used them, but sounds like an interesting service…
FYI, good post for boring-flight-is-delayed-down-time! Well done…
Ha thank you! I was REALLY REALLY bored. I haven’t tried that site yet, but I’ll check it out.
I hope that I’ll be able to love my credit cards soon! I’m working to just pay mine off. I’m not in a spot to use mine for regular charges just yet, but soon!
You’ll get there!!!!!!
An interesting perspective here! It’s important that people understand what credit cards and your credit score actually do. There’s a lot of misinformation out there that I think scares people away from using them.
I totally agree! They can definitely be a great tool if used responsibly.
So agreed! I ONLY use my credit card to pay for pretty much everything — it’s free money in rewards! Using cash just doesn’t make sense, since I can earn a little extra by using credit.
Totally agree – we keep our emergency savings in our checking/savings and use the credit cars for everything else. So easy that way!
Hey man! I think the link is broken for the sentence. Any chance you can direct me to the post? Thanks.” Fortunately I was able to use my credit card and basically game the credit reporting system which you can read about here. “
Hey thanks for the heads up!!!! Here is the link: http://millennialmoneyman.com/how-to-fix-your-credit-score-quickly/
I’ll fix it in the post as well.
I couldn’t agree more on the rewards end of it. So long as you can pay it off every time, you get a sweet discount of flight points on every purchase. Also, having my CC recently stolen, I can tell you that the security is nice.
Thanks for sharing!
Yeah the security is a big deal – I NEVER feel scared to use my Amex.
How about my husband will easily spend in excess of $10k per month when using credit, $20k on a big month. I have to limit spending with debit or else I’m done
Well he probably shouldn’t have credit cards then haha!