Let me start by saying I know this is an extremely touchy subject. You’re either going to call me an idiot or you couldn’t agree with me more. I’m all about telling you what works for me. It doesn’t mean it will work for you, nor do I expect you to agree with everything I say. It’s OK to take what other people say and form your own opinions.
As a financial coach, especially one who has gone through Dave Ramsey’s financial coach master training, you may be surprised to hear that my wife and I use credit cards.
Yup. It’s true. We use a credit card for almost every single purchase we make. While we love Dave and agree with almost everything he says, we don’t agree that credit cards are bad for everyone.
Why Credit Cards Are OK for Some People
It’s true that you can’t get rich on credit card points, but the only reason my wife and I were able to take small weekend trips to visit family when we were getting out of debt was because of those credit card points. It allowed us to save HUNDREDS of dollars in a single year.
Not only that, but credit cards give you extended warranties, rental car insurance, and if your card gets stolen (which is more likely than not in today’s world), the crooks are taking the credit card companies money and not your money.
I get that running a debit card as credit gives you the same protection as a credit card, but that?s besides the point. Debit cards don’t give you any other protection or benefits.
Who Shouldn’t Use a Credit or Debit Card
Now, should everyone use a credit card? Heck no.
In my opinion, if your mindset isn’t right and you aren’t aware of your budget, you’re just as likely to overspend using a debit card as you are a credit card.
Debit or credit, you’re still swiping a card. If you don’t know how much you have to spend for groceries in your budget, you’re probably just looking at your checking account balance and would likely spend more than you should.
If you’re that person, then you need to be using cash and not any type of debit or credit card, because you can’t control your spending.
How I Changed My Habits
If you read my debt story, you’ll learn that I was once in so much credit card debt that I was drowning. Clearly I shouldn’t have been using credit cards at that point in my life. I wasn’t budgeting and I had no idea where my money was going.
It wasn’t until after I was forced to give all of them up that I went to spend only cash. This completely changed my mindset, as I couldn’t just “charge it” and figure I would pay it back at a later time. If I didn’t have the cash, I couldn’t afford it.
Several years later, I got another credit card to help rebuild my credit. I promised myself that I would never go into credit card debt again, and I have kept that promise.
Something about using only cash for a few years changed my mindset. I was very aware how much money I had available to spend, and I wouldn?t allow myself to go over that amount.
Since I started using YNAB, it became even easier to budget. YNAB is very “credit card friendly”. It allows you to spend on credit cards, but if your money isn?t in your checking account, you can?t spend it using credit cards. I mean, you COULD, but if your mindset is right, you wouldn?t allow yourself to.
Mindset is Everything
Let me repeat that again – if your MINDSET is right, you won’t allow yourself to overspend on credit cards.
Before I go into the grocery store, for example, I look at my budget to see how much I have to spend. If I have $100 left to spend for the month, I know that’s all I can spend…. regardless if I was using cash, debit, or credit.
So, in my opinion, it’s not about what form of payment you use. It’s about properly budgeting and knowing how much money you have to spend before you go to spend it.
If you find yourself even thinking about spending more than you have budgeted, you need to go back to using cash. Likewise, if you can stick to your budget and you are aware how much you can spend, enjoy the many benefits of using a credit card.
