Credit cards are bad and only individuals who are financially irresponsible use them. Or at least that’s the perception I developed growing up.
So when one of my good buddies tried to entice me to get a credit card in college I reacted as if he offered me drugs: “No way, man!”
Although I was initially skeptical, a few months after graduating from college I opened my first credit card.
Since then my view on credit cards has completely changed and I now have 5 credit cards. I learned that if you use a credit card the same way you use a debit card, having sufficient funds in the bank to cover whatever you’re purchasing, then credit cards are great. They provide great rewards for doing nothing more than something you already have to do, pay for goods.
A word of caution; while I originally thought credit credits were only for the financially irresponsible, the opposite is true. Only those who are financially responsible should have them. If not used wisely credit cards can lead you down a seemingly endless spiral of debt. NEVER purchase something with a credit card that you don’t have the cash in the bank to pay off!
Here is a list of the credit cards I use and under which type of scenarios.
Fidelity Visa – no annual fee
This is my go-to credit card for all purchases that my other credit cards don’t offer special rewards. Fidelity offers 2% cashback on all purchases if you deposit the cash back into a fidelity account. This works well for my wife and I because we each max out our personal Roth IRAs every year so I deposit my cashback directly into my personal retirement account. We then use the value of the cashback that would have gone into the IRA, and move that amount of money into our vacation savings.
Discover It – no annual fee
5% cashback on rotating categories (fuel, restaurants, Amazon, etc) 1% on all other purchases.
American Express Blue – $0 (or optional annual fee to double the cashback percentages)
3% on groceries, 2% on gas, 1% on all other purchases.
Marriott Visa – $85 annual fee
We opened this card for our European vacation because it doesn’t have any foreign transaction fees. When we opened it we received 100,000 bonus points, which we’ve used for several free stays including nights in San Diego, Moab, and New York City.
Why I’ve kept the card: included in the annual fee is an annual free night and we like how it incentivizes us to go on trips and visit new places.
Delta Gold Amex –$90 annual fee
Both my wife and I have our own Delta card/account. We each received 80,000 bonus miles which were more than enough for us to fly round trip to Hawaii for free. I still can’t believe we flew to Hawaii for free just for doing something we’d already have to do (pay for things).
Why I’ve kept this card: I fly on Delta consistently and it’s nice being able to check a bag for free and board earlier. Because my wife flies slightly less frequently she will likely cancel this card to avoid the annual fee.
Everyone has different priorities and there’s a credit card to help you with each priority
For years I tried to convince my parents to open a credit card. I pointed out how much money they could get if they even got a card that only offered 1% (the bare minimum most financial institutions offer). I learned that cashback wasn’t a priority to them. But once they heard that my wife and I used credit card rewards to fly to Hawaii for free my parents realized they could use rewards to visit my sister in Texas, which is a priority to them.
There are so many types of rewards you can earn through credit cards. Everyone has different motives and for us personally, our priorities are family vacations and saving for retirement. When credit cards are used responsibly the benefits can really help you achieve financial and adventure goals.
Which credit cards do you use and why?
Dave Ramsey’s Rebuttal
For years I’ve been saying, “I agree with everything Dave Ramsey says except about credit cards.” This video (click link) explains his rationale behind his hard stance against credit cards (he made me laugh out loud and also makes a valid point speaking to consumers as a whole).
In addition, one of my in-laws knows that she spends significantly more money on impulse purchases when she has a credit card so she and her husband have closed all of their credit card accounts. I personally believe the opposite is true for me. If I carry cash I know if I lose it then it’ll be gone forever so “I may as well spend it before I lose it.” With credit cards on the other hand I know I’ll have to go log in and pay it off so I ask myself is this worth “having to go in and pay off?”
Ultimately, you’ll have to decide for yourself. Credit cards may not be “changing my life” as Dave asks but they’re certainly helping me enjoy more of it.