We have a lot of expenses coming up in the next few months (wedding, home repairs/renovations, travel, etc.), and because of that we are looking into new credit cards to apply for so that we can take advantage of better rewards and new bonuses.
It seems like using credit cards for a reward/bonus is becoming more and more popular. However, is it for everyone? I think there are advantages to using credit cards, but there are also disadvantages.
Positives of using credit cards:
Credit cards are easy to use.
Credit cards are not hard to use. All you have to do is pull it out of your wallet and the exact amount will be swiped. No need to look for change or carry any coins.
You also don't have to worry about losing your credit card as much as losing cash (you still shouldn't try to lose anything though). If you lose cash, then it's pretty much just lost forever. However, if you lose your credit card then you are mostly protected as long as you report it right away.
You also have credit card protection. You can dispute a charge with your credit card company if the place where you bought something from won't refund your money.
You can earn points for normal spending.
Using your credit card means that you can gain points and get things for free or cheap such as airplane tickets, gift cards, hotels, cash, etc., all for using your credit card. If you are going to pay for something anyways, then you might as well get something for free out of it, right?
Credit cards can be used to pay for many things – almost everything you can think of besides your mortgage. We have a lot of expenses coming up, and using credit cards can be a way to get something back in return.
We have around $10,000 in wedding costs that can all be put on our credit cards, a few thousand in expected travel, and probably a few thousand in home repairs/renovations. All of that adds up very quickly!
Easier way to track your transactions.
I like credit cards because I can easily track my transactions and see where my money has gone. With cash, I always find myself wondering what I spent all my money on.
Disadvantages of using credit cards:
Credit cards are easy to use.
Yup, I have this on both the advantages and disadvantages side of my debate. Credit cards may mean that you spend more because it's there. It can be easy to get approved for a really high balance on a credit card.
Recently, I was approved for a high limit on a credit card – $30,000. I don't even know why I was approved for such a high limit.
Can I afford $30,000 worth of credit card debt? NO! I don't want that either. If someone who can't control their credit card spending had a $30,000 limit, they might go crazy and buy everything.
Increased use to reach spending levels.
Many people find themselves spending more in order to reach a bonus, such as if you have to spend $3,000 within the first 3 months in order to qualify for a bonus. If you weren't normally going to spend $3,000, then the bonus is not worth it.
Some stores charge a fee for using a credit card.
Not many places do this, but some companies do charge a fee if you want to use a credit card for purchases. The fee is usually around 4% or 5%, which then makes using a credit card almost always pointless (unless you have an amazing rewards program) because you won't be earning the same amount in rewards back.
Also, some places will even give a discount on purchases if you use cash, so in these cases cash would most likely be best.
Possibility of hurting your credit score.
If you don't use credit cards correctly, it can lead to it decreasing and possibly ruining your credit score. There are correct ways to use your credit card:
- Always pay your bills on time.
- Try to pay the full balance each month if you can.
- Watch your utilization rate.
Do you have any rewards credit cards? Why or why not?
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