The Right Way to Use Credit Cards

 credit cards

Credit cards are a pretty controversial topic. They’re a very convenient way to pay for things, they can help protect you from loss in a way that cash can’t, they can help you track your spending, and they can offer attractive rewards. However, they can also be very dangerous.

First, because they’re so convenient, it’s very, very easy to overspend when using a credit card. And second, the interest rates that credit cards charge are really high, so running a hefty credit card balance becomes real expensive, real fast.

Because of the risks associated with using credit cards, plenty of smart and attractive people say you should avoid them altogether. Honestly, I think that’s sensible advice for people who know that they will overspend if they use a card, and believe me, you’ll know if that’s you. If you don’t have a handle on controlling your spending, refusing to use a credit card and sticking to cash makes a ton of sense and can really help you manage your money better.

On the other hand, I also honestly think that, used responsibly, credit cards can actually be a very handy financial tool. You know how I feel about tracking spending—spoiler: I’m for it—and using credit cards makes tracking spending as easy as pie (which is a weird saying, because I think pie is pretty hard to make). Using a credit card for most of your purchases and linking it to something like Mint, which allows you to create budgets and monitor your pennies across multiple accounts, can make keeping tabs on your spending about 10,000 times easier.

And then there are the rewards. There are tons of fancy cards out there that are made of metal and give you elaborate travel rewards and perks and whatnot. Most of these, however, charge pretty steep annual fees and it can be quite complex to get the most out of them. If you’re really into maximizing your credit card rewards, go for it.

For most people, however, a no-fee card that will give you 1.5% cash back is probably the best deal. With that kind of card, for every $100 you spend on groceries or gas or pet supplies or adult toys, you’ll get a $1.50 back for nothing. Personally, I find that I end up making several hundred dollars a year using credit cards, and it costs me not one single penny.

The secret, of course, is that you absolutely, positively must pay that sucker off in full every month. You don’t pay interest on your credit card bills unless you fail to pay your statement balance in full by your due date. But if you do pay it in full every month and choose a card with no annual fee, we are talking serious money for jam here. If you have the discipline to stick to your budget, and the resources to pay the bill every month, then using a credit card can be a positive financial tool.