Are Credit Cards Really That Bad?

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Credit cards by themselves are not bad. It's how we use them that is bad. If used wisely, credit cards can be helpful tool to help manage your finances.

Credit cards aren’t bad. I know…I said it. For many, a credit card is considered one of the evils of our society, something that should be avoided at all costs. I mean, after all, they can lead to serious debt. They also can charge astronomical interest rates creating debt that feels nearly impossible to pay back. The thing is though, while this may be true of credit cards and the credit card industry as a whole, it is still our choice to use them.

Which leads me to the question (I know, a blog really isn’t the place to ask a question, but I am going to give it a whirl anyways) are credit cards really that bad?

Credit Cards Can Allow us to Better Manage Our Finances


Recent numbers show that there are nearly 500 million credit cards in the US alone. It does not take a genius to see this number and know that credit cards are everywhere in our culture. For some of us, the prevalence of credit cards makes it easy for us to indulge our spending addiction. I know it was difficult for me at times. But if used appropriately, the best credit cards can actually help you manage your finances.

I know this really doesn’t apply as much today with our anemic interest rate climate, but why part with your cash before you have to? If you know you have money sitting in your bank account, why spend it when you can wait a month and use your credit card instead? Through the use of credit cards, you can have your cash work for you for another month at the bank and still stay on budget. I know this might be contrary to a frugal mindset, but if you manage it right, you can use credit cards and still be frugal.

You Can Earn Free Things Using Credit Cards


While trying to live frugally, I commonly look for things that will allow me to save money, or better yet, get free money. The latter can be difficult to find, but it is out there if you look. One of these ways is through the use of rewards offered by credit cards.

Through point redemption programs, credit cards offer everything from cash back, to rewards on travel, to gift cards. Credit card companies offer these as a way to entice people to sign up for their cards and keep their business. The card my wife and I use allows us to choose from any of those categories and we often choose to redeem our points for gift cards. This allows us to have date nights or do something fun without having to spend any of our own money. Just by using one of our credit cards, we’re able to earn free things that we normally would not get if we just used cash.

Credit cards by themselves are not bad. It's how we use them that is bad. If used wisely, credit cards can be helpful tool to help manage your finances.

What Your Credit Card Usage Say About Your Spending Habits


Is it possible to be frugal and at the same time use credit cards? Of course it is. Here’s the rub (and yes, it’s a difficult trick to master). The trick to using credit cards and still being frugal is…Drumroll please…spending only what money you know you have. That’s it. It’s that simple. There’s nothing magical to it. If reigning in purchases on your credit card or getting out of credit card debt is what you’re currently working through, then you probably shouldn’t be using credit cards for awhile. But, if you have a budget, or just simply only spend what you make, then there really is no reason why you can’t be using credit cards.

I often find that one’s credit card usage reveals how committed they are to managing their finances. If they’re spending money they know they have then I know they’re disciplined in their finances. But, if they’re spending money like it’s going out of style, I know there’s a bigger issue at hand and they need to learn how to live within their means…which really is the underlying issue. So, if living within your means is a challenge, then even using one of the best credit cards will only make that challenge more difficult.

Credit cards can be good, if you use them wisely. What are your opinions on credit cards…good, bad or indifferent?

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John is the founder of Frugal Rules, a dad, husband and veteran of the financial services industry whose writing has been featured in Forbes, CNBC, Yahoo Finance and more.

Passionate about helping people learn from his mistakes, John shares financial tools and tips to help you enjoy the freedom that comes from living frugally. One of his favorite tools is Personal Capital , which he used to plan for retirement and keep track of his finances in less than 15 minutes each month.

Another one of John's passions is helping people save $80 per month by axing their expensive cable subscriptions and replacing them with more affordable ones, like Hulu with Live TV.

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