Saturday, October 11, 2008

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!


21 comments:

Suzann @ Lavender and Roses said...

We are in the process of paying off all credit cards and I never ever want to charge more than I can pay off at the end of the month again. GREAT advice.

glorv1 said...

Manuela, thats real good that you keep track of everything, keeps you in line. We have no credit card debt, our home in Modesto is paid for, we have a rental in San Jose, and I owe about 75 dollars at Home Depot. I will pay that off and if we need something, we buy and when we get the bill, we pay it off. We don't charge and keep charging. We pay as we get the bill. We also have our emergency fund, and sometimes we treat ourselves. Life is good and we thank God for that. Good post.

Kelly said...

I don't think the credit cards themselves are evil, but instead how easy it is to get instant gratification. The consequences come later. Like you we follow Dave Ramsey for the most part and we have eliminated any credit card debt.

I would love to have the Quicken program it seems like a great way to stay on top of your budget. We have discussed it before but at the time didn't want to spend the money. I think I'll bring that up again.

Lady Katherine said...

It is great how organized you are on your credit cards. Yes we gave them up long ago. But the debit still there when I find something thats on sale. Or think I just can notlive with out!! Great post! I know credit cards can get you in trouble and most young people, learn that lesson early on. It took us a couple of times. i have friends that have learned to manage them as you have and it works for them too. Especially when you travel. We have been considering getting a prepaid one. But for now, there is cash and debit.

Laura Ingalls Gunn said...

I think that if you use the cards in a responsible manner, which it sounds like you do, then it is absolutely ok.
We have the same issue in our family~husband travels.

bec4 said...

I agree with you--credit cards are not evil--but you must use them wisely. We too, pay ours off every month. We go for the flyer miles and we all flew to Disneyland a few years ago. We have cards that do not have an annual fee. I love my Costco AMEX card--we get 3 cents back on every dollar spent on gas--this summer that was like a 12 cent saving per gallon. The check comes to Costco--but can be cashed. I will use it at Costco I am sure. I do like the dame Ramsey approach to finances, but I do think he can be extreme too!

Rachel and Jacob said...

thats wonderful to get nice rewards back!!!

Anonymous said...

We now only use credit cards if we can pay it off in full when the bill comes. We have thought about charging our bills to a credit card for rewards, but have yet to do it. I like not charging. We have money in savings and like glorv1, I think God that we are able to do that.

I'm curious as to what debit card has rewards? We have a visa debit card and I use it for most things as I don't carry much cash. But I use it as a debit card only. It doesn't offer rewards.

Thanks for the info!

tina

tinam61@yahoo.com

The Haban Family said...

I just started reading Dave Ramsey's book but, we have the same issue as you guys with DH needing a credit card - this is a great compromise and way to go on all the rewards!!!

Penny @ Lavender Hill Studio said...

Great tips! Credit cards require self control..If you don't have self control, don't get a credit card.
Hugs,
Penny

Rhoda @ Southern Hospitality said...

I think that's a great way to use cards. I have never gotten into using them all the time & getting all the rewards. I should check it out. I love your idea of getting all that free money! Dave Ramsey is such a great inspiration, I love hearing him.

I was cracking up that you begged your hubby to stop at my yardsale! I wish you would come over here with him sometime. We would have so much fun.

Lyn said...

Manuela,
You're a smart lady for sure. I agree with everyone else - you seem to be doing this responsibly. Kudos to you!

Might you have any tips on how to find these cards with reward incentives? I'm wondering if it might be harder to find them these days with the challenged economy?

nikkicrumpet said...

One of the deals my hubby and I made when we got married was that we promised that neither one of us would ever carry a balance over on a credit card. We use them for almost everything...for the same reason you do. We get free airfare and it comes in very handy with our families all living out of state. We just make sure that at the end of each month the balance is paid in full. It takes alot of self control...but I love the benefits of not carrying cash around...and I love the rewards!

Lorie said...

I love Rewards Cards! We are about to venture to Disneyland with $500 in Disney dollars thanks to our (no fee) Chase Disney Visa. And we added landscaping to our back yard with a $250 gift card from Home Depot. All from rewards cards that we use and pay off each month!

salmagundi said...

Great info, as usual!! I also got caught up on your recent posts after being gone for a few days. The redwork pillow covers are great and must look amazing with black & white toile. Sally

Sue said...

Hi Manuela...I saw on Nikki's blog where you miss New Jersey and you live outside of Atlanta...Hey, so do I!!! Infact I write my blog about the crazy things that happen down South and all the reasons I miss Jersey. As my neighbor says..I'm the only person she knows that thinks Jersey is the Promise Land....sue @rue-mouffetard

ROXY said...

Great advice Manuela!! I think your organization is commendable!! thanks for sharing:)

She'sSewPretty said...

My daughter and son in law do this too. They keep telling me to try this method. They manage to eat out every few weeks on their "gift cards".

ShabbyInTheCity said...

I got my Visa thru L.L. Bean and always pay it off every month. I love the free stuff I get out of their catalog. We are 99% sure we ate next to Dave Ramsey last week in a restaurant!

Paula said...

Dear Manuela,
Wonderful advice! Thank you for sharing.
Blessings, Paula

Susan said...

We don't have any credit cards any more...but my BIL has an AMEX he uses. Since the airlines have stopped the frequent flyer miles, he uses his Amex for everything. It gives him airmiles and they use those for family trips to Texas, where family members live.