“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'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.
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?