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Credit Cards as a Money Tool

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Much of America has is in debt. Sometimes it's good debt and other times it's bad debt. I wrote about good debt vs. bad debt last week. Credit cards that you don't pay off are an example of bad debt. Many of them charge upwards of 20% interest. For that reason some people have decided to not to use credit cards at all.

It doesn't have to be all doom and gloom with credit cards though. For those with the means and fortitude to pay them off every month, there are definitely rewards. Just be sure you can you handle the responsibility before you try. Here's a list of the benefits that responsible users of credit cards enjoy:

  • Free Money/Rewards - I get 5% back on gas with my credit card. With my local gas prices at $4.55 a gallon, that's nearly 23 cents a gallon. (My credit card doesn't seem to available, but the Chase PerfectCard seems to be a good alternative with 6% for the first 90 days and 3% after that.) I get the same 5% off of grocery and drug stores. I get 3% off of restaurants, home improvement stores, and office supply stores. Every few months Chase sends me couple of hundred dollars. That's one piece of mail I don't getting. It is a lot better than using a debit machine that rarely gives you rewards.
  • Free interest - The extra time that I have to pay off the credit cards is time where I'm making a small amount of interest by keeping the money in the bank. Admittedly this is a very minor, but real benefit.
  • Enhanced warranties - Many credit cards double the warranty of many consumer products.
  • Consumer Protection - Have you been wronged by a merchant? Often times the credit card company will go to bat for you. I don't use this benefit very often. I don't want to be the one that cries wolf. However, once every 12-18 months, it proves to be a very valuable perk.
  • Building Great Credit - By paying off my credit cards each month, I have been building great credit for years. It paid off when it came time to get a mortgage and I qualified for the lowest rate - the teaser rates that very few people qualify for.
  • Emergency Protection - You never know when something is going to come up. I don't want to carry that much cash on hand. Debit cards help, but I like to keep money earning the most interest possible. As such, I don't keep a lot of money in accounts where I have debit cards.
  • Spending History - I can give a service like Mint, or Quicken my credit card transaction file and it will analyze where and how I'm spending my money. If I see I'm spending too much on eating out, I curtail it.

This is just another example how emotional control can add up to very real, tangible gains.

Last updated on August 1, 2011.

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6 Responses to “Credit Cards as a Money Tool”

  1. Solomon says:

    I never spend money on my credit card that I don’t already have in the bank. And I haven’t paid anything in interest for about 2 years now.

  2. Joe Bob says:

    If you know up front to budget for the expenses charged on a credit card and then pay it off each month, they can be beneficial. many people can’t do that though.

  3. KingTut57 says:

    Once again. This is another issue within money that most likely has not been taught to many. For the most part people know credit card debt (i’m not talking about using them and paying off but actually carrying debt) is a bad thing. People just don’t really know the true cost of making minimum payments or putting down payments for cars on a credit card. I see it all the time.

  4. Rob says:


    Great article.

    Unfortunately, most of the credit card holders are not even aware of their interest rate, or how it works. Revolving credit is a very negative spiral that can drain anyone’s pocket.

    Many folks learn the wrong way: they accumulate so much debt that end up having to pay it back for a long time or file for bankruptcy.

    About 40% of the loans issued through our P2P lending platform (Lending Club) are for debt consolidation and repayment. Getting a fully amortized, fixed payment, no prepayment penalty is the best way to get rid of current debt… never get payday loans.

    Personally, I do not spend more than I can pay back (money is in the bank and the expense has been budgeted for).

  5. I am currently using my Chase card for all of my everyday purchases due to a current promotion they have going. All I have to do is use my card everyday during the month of July and I get a $5 statement credit up to $155. I am only using the card for purchases I’d planned to make anyway and I have the money set aside to pay the bill in full next month.

  6. While it’s true many people are psycho when it comes to credit cards, I’ve been fine w/ using it as a “Money tool”

    I put every thing i possibly can on my card (for the tracking and simplicity part of it all), and then pay it off in full each month.

    I’m also *possibly* buying a car and slapping it on the credit card! haha….it’s only $3,400 and my rate at 5% is lower than an actual loan. it’ll be paid off within 5-6 months, but it goes to show you can put a LOT on those bad boys ;)

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