With Thanksgiving behind us, we have officially entered the season of shopping. I don’t know about you, but I always end up spending so much money in December, picking up last minute gifts for people, dinners and drinks out with friends, and of course on holiday travel.
I’ve talked about it here before, but I do most of my spending on credit cards. I only use my debit card when I need to get cash back, and I very rarely have more than twenty dollars on me at any one time unless I’m going somewhere where I know I will need cash.
I use credit cards for three major reasons:
- It’s easy to keep track of my spending.
- It’s safe.
Number one is pretty self-explanatory. I don’t have to worry if I misplace a receipt. All of my spending is recorded on my credit card statement and I can check it at anytime.
I like the safety that comes with credit cards. If I end up with a fraudulent charge, I can contact the company and they take care of it for me and I’m not liable for the charge. If I lose my card, no problem. This is also true with debit cards, but I’m always worried about a fraudulent charge putting a hold on my money and not leaving me with the money I need to pay upcoming bills. Of course, this means that I have to keep myself in check. One big benefit to debit cards is that you can’t spend more than you have.
Finally, credit card rewards. You mean that some company is going to give me something for simply spending money on things I was already going to buy? Count me in!
Of course, this comes with a number of caveats. Rewards cards have some of the highest interest rates among credit cards. This makes sense, of course. How else are they going to pay for the rewards? I pay off my cards monthly, so I don’t have to worry about the interest rate. I admit, I don’t even know what the interest rate is on any of my cards. So if you’re thinking about a rewards card and plan to carry a balance, stop right now and look for a card with a good rate, not one with good rewards.
I personally have two rewards cards. Both happen to be from Chase Visa, but there are lots of good companies out there. These are just the cards I like.
One, my Amazon Visa is my everyday card. It gives rewards in the form of points that can be spent at Amazon.com. Of course, since they want me to spend at Amazon, I get triple points when I shop there and double points at a few other categories of places. A point is about $1 for every $100 spent. Maybe not the highest rate of all the cards, but it’s a reward I actively use, so it works for me.
My other card is my Disney Visa, which gives me points that can be used on a rewards card that acts like a Disney gift card and can be used at Disney parks, stores, and online. I use this card primarily for bills, such as my internet bill and my cell phone bill. I don’t rack up quite as many rewards, but as I try to make a Disney trip every year or so, it’s nice to have a bit of extra money to spend when I go. I’m making a quick trip to Disney with some friends this winter and will have enough rewards to cover my meals while I’m there. I’ll take it.
One big key to the cards I use is that I have chosen to not get any cards with an annual fee. This is my choice after analyzing the rewards available. I have a lot of friends who love their airline miles cards, even though they have an annual fee. They did the math and they still come out way ahead.
So make sure you do your math. Figure out if any of the many rewards cards are right for you and pick one with rewards you know you will be able to use. And then be sure to pay off your cards every month. No reward is worth paying a ton of interest.
For ways to make sure you stay in budget, even when using credit cards instead of cash, check out these articles.
Megan is a 30-something government employee in the Washington, DC area. She got interested in Personal Finance when she got out of college and realized that her paycheck wasn’t going to go as far as she had hoped. Since starting this blog, she has managed to buy a house and make a solid start on her retirement goals, and hopes to help others do the same. Here is her story:
In 2007, I was a gainfully employed 20-something with no debt but not a lot of knowledge about personal finance. It was a co-worker’s comment about Roth IRAs that sent me to the internet, searching for information. It was then that I realized that I really didn’t know a whole lot about personal finance and that my current financial situation was due a lot to inherent frugal tendencies, generous family members, a fear of debt, and good luck. While that was working for me, clearly I needed a better plan.
While I had no debt, I was also pretty much living paycheck to paycheck and not worrying about going over budget (I say this as if I had a real budget) because I had an emergency fund set aside to cover any overages.
Except that’s not what an emergency fund is for.
So I did a lot of research, read a lot of blogs, and decided that I needed a plan. I needed to budget. I needed to know what I was spending my money on. I needed to prepare for the future.
I decided to create a blog not only to make myself accountable to others but also to share the knowledge that I gained along the way. I’ve learned so much from my fellow bloggers, and I hope that my readers can find something useful in what I have to share as well.