You guys know how much I love my cash back credit cards now that I no longer carry credit card debt. Many PF Bloggers say that credit cards are evil and we should only use cash but I use my cards responsibly so that system works for me.
Recently I was talking to someone about a purchase we were thinking about and said that I would have to wait because I did not have the money for that right now. She must have thought I meant I did not have my checkbook or cash because she looked at me and said “Oh just put it on your credit card.”
I told her the issue was not that I did not have the available funds handy on my person at the time but that the amount did not figure into my budget. She still looked confused and then asked me if my credit cards were maxed out. I had to tell her that I had a zero balance on the two cards that I used and that even though they gave me cash back I was not about to buy that particular item because:
- I did not need it and
- it did not fit into my budget.
This person could not understand why I would not buy the item if I wanted it and had money on the credit card. I just sighed and thought about how much trouble she was getting herself into by acting like the credit card would magically pay for itself. I told her I did not want to add to the purchases for that item and since it was not in my budget I would not give myself the burden of paying for that item and messing up my budget.
This person does not have a budget and lives paycheck to paycheck with the inevitable period of electricity getting cut off because she did not pay the bill. She lives on a daily basis of immediate ‘wants’, often ignoring the ‘needs’ that will show up in the future. I do not think that is the best way to live because it assumes the credit card is a safety net that allows her to get things when she does not have money available for them.
To me the credit card is a tool that I use to:
avoid touching cash (because it is so nasty)
track my finances
earn cash back
NOT a fairy godmother that gives me things I cannot afford. Every purchase that goes on my credit cards is accounted for in my zero based budget and carefully tracked. Even when I do go on a spending spree (like I supposedly did for my birthday) the purchases that go on the credit card have already been accounted for because the money is coming out of my Splurge Fund in my ING account.
I ended up not getting the item and walked away knowing that my budget was on track……and secretly laughing that I could have gotten the item if I REALLY wanted it….but it was not that big of a deal to me.
Congrats Lulu. It takes some willpower to not use your credit card to buy things you cannot afford. Of course doing so would cancel out any savings you got by using your cash back credit card. So you’ve made a wise decision. Just because you have room on your credit card, it does not mean you should go ahead and buy whatever you want with that balance.
I agree, it takes a lot of commitment and character to stick to your guns when it comes to popping out the card. Many times, I’ve used the credit card so freely as if someone else but me was going to pay the bill later.
It’s definitely easier to spend money with a credit card than cash. I really notice money disappearing when I pay with cash.
I’m the opposite way. If there’s cash in my wallet I am much more likely to spend it. If I have to use my credit card, it at least makes me stop to decide if it is really necessary.
That’s interesting. There’s also the extra step of trips to the ATM that causes me to think about my purchases.
Excellent advice, Lulu. Here is a peppy new video giving the same sort of advice on the responsible use of ATM, debit and credit cards.
Card Tricks Revealed: How Not To Burn Money
Credit cards should only be used in an emergency situation when there is no other option.
I totally agree with you. I am a big fan of both cash back credit cards and travel rewards credit cards. You should know how much money you have, what you can afford, and how much you can spend at all times. The available credit on your credit card means nothing. It’s just another way of transferring funds. You might as well collect the points or cash on everything you spend! I’d rather that money be in my pocket instead of somebody else’s.
i dont have a credit card as i make all my purchases on debit cards … this looks gud , but im not kinda spendthrift …. so wont benefit me much 🙁
I agree. I use my debit card for most purchases. The only things I use a credit card for are expenses I share with my girlfriend, like groceries, gas etc. It’s great to get those on a monthly bill and just pay half each. Those are necessities – no “wants” on the credit card, only “needs”.
interesting use , i ddnt have that in mind , very clever .. 🙂