Why I Love Credit Cards

15Jul09

I absolutely love credit cards… but not for the reasons that most people love them.  Just a few minutes ago, I opened up my Discover.com account, looked at my balance, and paid it off by using accumulated cash I’ve earned up this past year from using my Discover rewards card at grocery stores, gas stations, and pretty much everywhere else that accepts Discover.  Just spending money like normal “earned” me $130 in twelve months as a reward of paying off my balance in full every month.

I’ve been very strict on myself about the use of credit cards.  I’ve heard horror stories from friends and family about the trouble they’ve gotten into from the interest of not paying off their their cards and/or just making the minimum payment each month.  I essentially use my credit card just as I would use a debit card.  I only use it on what I can pay off the instance that I use the card.  Basically, I only spend the money on the card that I can back up with money that I already have in the bank; so I’m really not using my credit card as credit…  I’m using it to build credit.

When I first got my credit card, I went to the extreme of paying it off almost once a week online just to make sure I didn’t get in over my head.  By previously being an exclusive debit card user, I was used to the money withdrawing directly out of my checking account as soon as a purchase was made.  Luckily, I never fell into the illusion spending “free money” when using my credit card.

When choosing a card, I did some research on what would be the smartest one to get.  I knew from my dad that Discover had a great rewards plan at 1% cashback on all purchases.  When I arrived at their website, I found the wonderful Discover Miles card.  This card gets you 5% cashback on gas and other automotive purchases.  This was great, especially for a credit card rookie.  I started out using the card on gas alone, all the while earning about five bucks a month on gas I needed to buy anyway.  Who would want to turn down five free dollars a month?  In addition, I was slowly building my credit which has helped me tremendously this past year in transition to moving to Alabama.  Having a good credit score kept me from having to pay security deposits for our internet and electric service and also got me great interest rates quotes on a mortgage loan.

When you’re using credit cards safely, it can’t hurt to have an additional rewards card in your pocket.  Tonight I was approved for the American Express Blue Cash card.  This card gets me 5% cashback on groceries, gas, and drugstore purchases.  We’ll definitely be using this one at the grocery stores when it gets here.  If you spend $200/month at Wal-Mart on groceries, using this card will get you $10/month cashback just for using it and paying it off in full at the end of the month.  That’s $120 a year!  Additionally, having an extra credit card that I don’t carry a balance on increases my debt-to-credit ratio, which also increases my credit score.  This ratio is just how much you owe divided by how much you can spend.  The better your ratio, the better rates you’re going to get because your credit score will be better.  Adding this card gives us more we have credit to spend, but we’re of course going to keep spending the same, thereby helping this ratio.

When using credit cards safely, they really are a wonderful resource.  Don’t let people tell you that credit cards are evil or that credit cards are bad… they’re only bad when the people that use them aren’t careful with them.  Without credit cards, I’d have zero credit history and $130 less dollars in my pocket this past year.

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One Response to “Why I Love Credit Cards”

  1. – this was a very well written article
    – i feel highly educated even more on credit cards
    – I love my discover card but it sucks how so many places don’t accept it, whatevs


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