It is always interesting to see the change in people’s reactions when they find out what you do for a living. On a recent hunting trip, I was one of several adult males in the shed while we were cutting up our deer. One individual that happened to stop by was cussing fairly regularly in conversation.
At some point, the fact that I had previously been in professional church work came up. His eyes went big and his face turned red in embarrassment as he apologized for his language. His jaw hit the floor when I grinned and said it was OK because we are all human. Oh yeah, I may have used a cuss-word of my own in there too.
I generally try to keep my language in control, but what can I say? When people least expect it, I like to go for the shock value.
To switch tracks here for a moment, let me put on my hat of the certified consumer credit counselor and educator. There we go. Now, let’s talk credit cards. Upon learning of my current role as counselor and educator, I have had people become apologetic about even having credit cards. They avoid direct eye contact, lower the volume of their voice, and even mumble something about cutting up their cards when they get home.
“Cut them up? That would be a stupid move! If someone has given you a line of credit, USE IT!!!”
Now that I have your attention, let’s temper that just a little – “If someone has given you a line of credit, use it RESPONSIBLY!!! But use it.”
There is no doubt that misuse of a credit card can put you in a world of hurt very quickly. But, used appropriately, there are different circumstances in which it is actually a good idea to use credit cards.
Don’t worry; I’m not going to leave you hanging. Here are some situations where you may want to use your credit card:
With A Plan – You always want to have a plan to pay off your credit card, preferably paid in full as soon as you get the statement. Know how much you are putting on the card and that it will be less than you actually have available for payments next month when it is due.
For the Rewards – I know an individual who travels for a living. All of their expenses go on a credit card and are reimbursed by the company before the next payment is due (meaning no interest). For every dollar they spend on the card, they get a penny to spend at the large sporting goods chain the card was offered through. “Just a penny?” you ask. When they needed a new trolling motor this summer, they bought top of the line and didn’t pay a penny for it other than points from the credit card. Now that’s a good deal.
For the Security – Cash is by-and-large untraceable. If you lose your wallet or purse, your cash is simply gone. Credit cards on the other hand, can be cancelled at the drop of a call. Those who find your property will have nothing more than a very small window scraper (yes, credit cards work for that too). Credit cards provide a certain amount of security that cash and even checks do not. If you report your card stolen, your maximum liability for fraudulent charges is usually at most $50 per transaction.
For Rentals – Whether it is a car or a hotel room, a credit card has advantages over a debit card. Use a debit card and they may actually withdraw a deposit from your account, potentially leaving you overdrawn. Some places will even run a credit check on you if you use a debit card. That’s a hard pull that negatively affects your credit score. Use a credit card and it’s veeeeerrrry unlikely either of those will happen.
For the Timing – I bought my first laptop on a credit card. That was back when I spent a whopping $2,500 on a fairly average machine. I then took just under two years to pay it off. Surprised? It was one of those ‘2-year no interest’ deals. I was able to pay something like $75 per month and it really didn’t hurt our budget much at all. But they do keep track of what you would owe in interest. If you are short even $1 of paying it off by the end of the period, you will owe that $1 plus the interest that would have accumulated over the initial interest free period. Umm, that got expensive in a hurry.
For Delivery – Most credit card purchases that involve the delivery of goods or services at a later time include protection, even after the delivery. Didn’t get what was promised? You can talk to your credit card company and have the charges stopped. It may get ugly and you will probably have to provide more documentation to justify your actions later, but at least you don’t have to get money back that was already paid out.
To Get More Credit – It’s kind of like when you started driving. If your experience was like mine, I first got to drive when only my parents were in the car. Then I could just make a quick run to the store by myself. Eventually I got to give rides to friends and even take the car out of town, but only after I had proven myself with small trips. The successful maintenance of a credit card account is like those quick trips to the store. It proves your ability to be responsible when you are asking for more credit in the future. ‘Time’ and ‘Wise Use’ are the two biggest pieces for building your credit history.
For Emergencies – This one starts blurring the line a little in defining exactly what an emergency is. I assure you that last minute front row concert tickets are not an emergency. There are times, however, when we need to pay a bill that we don’t have cash to cover. Perhaps it’s a major car repair so that you can get to work and not lose your job. You probably won’t be able to pay it off at the end of the month, but the interest payments are most likely going to be less of a consequence than not spending the money at all.
With A Plan – Oh wait, did I mention that one already? Yes, it’s that important. If you are going to use a line of credit, have a plan in place to repay it before you even spend the money.
Even if you have used your credit card outside of these situations and have gotten yourself in a bit of a pickle, don’t just hang your head in embarrassment. Look up, speak up, and get things on the mend. If you need help, our perfectly human counselors are here to help you. Recently we had a client make their last payment on $90,000 of debt through our Debt Management Program. That was $90,000 to $0 in debt in 5 years.
Better yet, have a plan first (did I mention that yet) and then use that credit!
written by Breck Miller
images courtesy freedigitalphotos.net