Are Credit Cards Evil?

I've spoken before about how we follow the Dave Ramsey plan for finances. We do with one exception. He is totally opposed to the use of credit cards - he doesn't want you to have one at all. Instead he wants you to have a $1000 emergency fund (which we have) and use that instead of a credit card if something crops up. Well, I don't know how he travels without a credit card! We would need waaaay more than $1000 to cover my husband's business travel for one month. So my husband uses a credit card and we get reimbursed the expenses.

As a matter of fact I use our American Express card and my bank debit card (as a credit card) all the time! It's the one way I fund my home remodeling/decorating projects and the one way we still manage to eat out. I make my credit cards work for me. How do I do it? Our credit cards have paid us thousands in reward cards!

That's right - rewards cards! Home Depot, Bed Bath & Beyond, Red Lobster, Starbucks, Barnes & Nobles, Applebees - all kinds of stores and restaurants. The picture above is what I have on hand today.

Now I have to say that since we get reimbursed for my husband's travel expenses we start out with a slight advantage. But even so, I have everything from our electric bill, water bill, my husband's healthclub membership, our cell phone anything that's a reoccurring expense, charged directly to Amex or our bank card. You have to pay these things anyway so you might as well get something back for doing so. The only thing that I pay cash for is our groceries. I find that grocery shopping with cash keeps me on budget. If I don't shop with cash I always go over.

We use Quicken and every morning I make a record of all things that were charged. We keep our receipts. I have a file box where I file my receipts in alphabetical order. At the end of the year we only keep the receipts we think are necessary for taxes and the rest get recycled. Every morning I download our checking acct info into Quicken since we also have a rewards program on our debit card (we get double the points if we use that card as a credit card at checkout). All charges are accounted for in Quicken. I use a lump sum "Pending" category for all reoccurring bills that get automatically charged and when I pay Amex I then break it down into specifics. Amex is actually very good about letting you pay online as many times as you want. Some credit cards have limits like they only will do 3 payments in a month so you need to check into that.

We NEVER use our credit cards for impulse shopping or buying things we don't have cash for. So far we've been lucky and haven't had any sort of house/car repair that couldn't be handled with our emergency fund. Although I would charge it and then pay it off to get reward points.

We have no credit card debt. The key to using this system is to be truthful and know yourself. If you're going to use your card to purchase things you don't have the cash to pay for in the first place, this plan is NOT for you! For those who can use their cards responsibly, it's a great way to make them work for you and a fantastic way of stretching your dollars. I wouldn't be able to do half the things I do without my Home Depot Giftcards - how would I buy paint, plants, etc? We really would very rarely eat out if we didn't have GC's to restaurants. If there's a store there's a gift card available for it.

Just an example of how I use GC's. I needed a new blender. The one I've had was a wedding present so it was over 20 years old. Last year it stopped chopping ice which was o.k. but last month it started leaking from the bottom. I make a lot of smoothies for breakfast so I need a blender. I had a Linens N Things GC for $15. I found a Black & Decker Crush Master on sale there for $27. B&D had a mail in rebate for $5. Total cost to me $7 for a brand new blender! Even without the rebate it would have only been $12 for a new blender.

The key to using this system is "to thine own self be true". If you know you're not going to be diligent about keeping track of charges, or you use your cards and don't have the cash to pay them off, this is not for you!!

Otherwise, it's a great way to make your money stretch!