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Posts tagged with: Credit Cards

How I Use My Credit Card

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There have been lots of questions and confusion in the comments of my latest budget post regarding my credit card. Rather than responding to all the individual queries, I thought I would clear it up here.

Credit Card Details

My line of credit on my only credit card is $5,000. This past fall, I was able to pay down the rolling balance from continually maxed out at $5,000 to $3,700. And I’ve kept the maximum balance at that $3,700 range for the past few months.

How I Use It

I use the credit card as a rolling line of credit. Meaning, I use it but pay it off immediately. And I use it a lot every month. I pay a number of my monthly bills with it as well as use it for gas and groceries.

This is why I don’t have a minimum payment for the credit card in my budget. I pay the minimum in my usage and payment strategy. But have been good at no longer growing the debt this fall.

My Reasoning

I realize that this is not the recommended use for a credit credit. But I do this for two reasons:

  1. One it gives me added protection from having my bank account cleared out again. (This has happened at least twice in the last 4 years.) I am very careful about using my debit card or anything that has direct access to my cash.
  2. It also allows me to keep paying on this debt and not growing it any further.

I hope this clears up the questions about my credit card, why I didn’t budget a minimum payment for it and how I use it. If there is anything I missed, please ask in the comments and I will do my best to answer.

I do know that I am not willing to close this last credit card account, even when I do get it to $0. But I will definitely always have the cash to pay it off. I just feel safer using it when traveling and for the added security with larger purchases, car rentals and more.

Editors note: One way you might consider improving your credit score is something called tradelines.  When you get a tradeline you’re basically paying a fee to be added to someone else’s credit.  Buying tradelines isn’t for everyone.  It costs money and unless you want to spend thousands of dollars a month, its only going to be a partial solution.   So you’ll want to be sure your bills are paid on time and your credit card utilization is low.


Is Using Credit Immoral???

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Happy Valentine’s Day (or Singles Awareness Day, if you prefer)! : )

Here’s a fun little philosophical question for you….is using credit immoral?

Let me back up and explain the question a bit.

I’ve had credit cards my entire adult life (even though I didn’t get into debt until much later, my first credit card was at age 18 so I could “learn to use it properly”. See my debt story here).

Even when I paid off my last credit card back in June 2014, I never cut them up and closed the accounts as Dave Ramsey would suggest. Instead, I put most of them in our household safe. I still carry 2 with me all the time. One of them (my Target card) I use anytime I shop at Target so I can receive 5% off, plus I use it for online gift purchases for friends’ weddings/baby showers/etc since I save 5% AND get free shipping (I wrote more about how I use this method to give gifts for cheaper here). My other card (a Wells Fargo card) has the best reward program, so I use it for all big-ticket purchases (e.g., preschool tuition it automatically charged to the card monthly). I carefully track these expenses (and still use my debit card for day-to-day spending) and pay the balances in full each month. I haven’t paid interest a single time because I’m really vigilant about paying on time and I’ve never had any issues. Plus, I receive perks from these cards (a discount at Target, and the Wells Fargo card lets me use points to pay bills, receive cash, or get stuff free – I used it at Christmas to get the girls a really cool toy totally free).

I never saw anything wrong with any of this. This is the way to use credit, right? Make it work for you so you have some benefit, then pay it in full every month. I thought this was responsible credit usage.

Then I was listening to an old podcast from the Dave Ramsey show and someone asked him this very question:

Is it “okay” to still use credit cards as long as they’re being paid in full every month?

And Dave Ramsey’s answer surprised me a bit. OF COURSE he says no (he’s the “absolutely no debt/no credit” guy). Part of his reasoning is that studies have shown people tend to spend more when they buy with plastic  (this part doesn’t bother me – same thing could be said for debit, not credit); another reason he gave is that people can fall into a trap of forgetting to pay on time and winding up paying interest (fair, but this hasn’t ever been an issue for me); and the final reason is what caught me off guard. He said that if you use your credit card to buy things and pay it in full every month, you are essentially ripping off the credit card companies. That is not how credit card companies intended for their cards to be used, and Ramsey basically likened it to taking money out of someone else’s pocket. Like it’s cheating the credit card companies. In other words….its immoral.

I had never thought of it that way before and it definitely struck me. I tend not to sympathize with giant credit card companies (especially as they are making money hand-over-fist off others and I’ve MORE than paid for all my “free perks” in the interest I’ve paid them over the past 8 years when I still had credit card debt). But still, it got me thinking.

What do you guys think? Is it immoral or in some way wrong or cheating the system to use credit cards if you pay them in full every month? What do you think is fair and honest for credit card usage?