Using a Credit Card Wisely

At the end of February I accomplished my number one goal of eliminating my credit card debt.  I was faced with the decision of whether or not to close the account and I decided to keep it open in case of an emergency.  It has been about 2 weeks since I have paid the card off and now I am faced with yet another question: Should I continue to use the card if I am able to pay the balance at the end of each month?

My first instinct is to say “no”.  I worked hard to eliminate my consumer debt from my life, why on Earth would I want to start digging that hole again?  After considering the answer to this question it brought about some other points which should be considered as well.

Convenience- Many people feel uncomfortable carrying around cash.  I’m no different.  I have a tendency to misplace my wallet often and when I have any amount of cash tucked away inside it causes a certain level of panic.  I am not able to get that money back if my wallet is actually lost.  It would be gone with the wind.  Credit and debit cards offer protection against theft or loss which provides the carrier with a sense of security and assurance.  You are able to call your credit card company or bank and freeze the account so that no unauthorized transaction are posted to your account.

Rewards- My credit card earns cash back on each purchase I make.  The rewards aren’t much, but over time can add up.  It may take spending $10,000 to get a $100 check, but if I am going to spend the money anyways, shouldn’t I be getting something out of it?  People will argue that getting 1% cash back on purchases doesn’t make sense when statistics prove that purchases made on credit cards are generally 30% higher than if the person had paid with cash instead.  They are right, it wouldn’t make any sense, but if the card is used for fixed bills or other bills that don’t involve shopping, such as the mechanic bill for repairing your car, in my opinion that argument is no longer valid.

Account Activity- Credit card companies have been on a rampage lately, closing inactive accounts and raising interest rates on the accounts that aren’t generating money in hopes that the customer will close their account.  Why would card companies do such a thing?  Its pretty smart actually.  You aren’t earning them any money and are costing them money from having to maintain your account.  You are no longer an asset but a liability, and that means you get the axe.  If my account does not get used it will end up being closed.  This is my only credit card and having access to a line of credit, for the time being, is important in case I find myself in a situation which I actually need the money.

It is true that I worked hard to get myself out of debt and it would be foolish to put myself into the same situation I just fought so hard to beat.  I do feel that the responsibility for my situation lies directly at my own feet, not the credit card company.  If I was responsible for the bad situation, then that means I am also responsible for the good situation which I could provide for myself by using my credit card responsibly.  If I am to fall back into the same pattern as before then it will have been no one’s fault but my own.

I have come to the conclusion that using the card in some instances makes more sense than using cash.  I have decided that before I make any purchase or payment that I have money in the bank to cover what I am spending.  I do not think that credit card companies are evil, they may be sneaky and underhanded, but that only means that we as consumers need to be smarter to win at their game.  Dave Ramsey says that “if you play with snakes you’ll get bitten”.  He is right most of the time, but what about the snake charmers in India?