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.


  • Pauline says:

    All the rewards, cashback, miles and interest-free credit for over a month are real perks, if you know how to use your card wisely, there are lots of benefits. I always pay in full or take advantage of a 0% balance, but there is a reason why they encourage you to spend, the vast majority of user don’t have the discipline to make the credit card work for them!

    • John says:

      You’re exactly right Pauline, the card companies do want you to spend and then not pay it off. That’s how they make their real money.

  • Sean @ One Smart Dollar says:

    I am a huge fan of credit cards. You just need to be smart about using them and pay them off at the end of the month. The rewards that you can earn can lead to some nice bonuses. This could be cash back, airline miles or gifts.

  • Holly@ClubThrifty says:

    I think it depends on the person. We only use credit, never cash. I play the credit card rewards game all the time and that is how I get most of our *fun* and *spending money.* Right now I have $800 in credit card rewards saved up to spend on something fun!

    Of course, this only works if you are on top of it enough to pay the balance in full and not pay interest. This is where people get into trouble.

  • John says:

    You totally right Holly, it does depend on the person. And if you have a spending habit or your best friend is the mall cop you should probably avoid credit cards.
    I don’t have the stomach though to play the rewards game though, I think I’d always fear making a payment to someone.

  • Veronica Hill says:

    John, your post and Amy’s on my blog tell a similar story. If the person is responsible and understands that you can’t go all out crazy with spending on credit cards, they are actually a life saver at times. Last year I had the opportunity to make some profit in adwords but couldn’t handle the daily expenditures (upwards of $1000 / day) so I put it on my credit card (no longer have one). Any time I find a profitable product and run an ad campaign at scale, I plan on using credit cards!

  • John says:

    Those were my thoughts as I read her post yesterday. I totally agree that can be a lifesaver at times when you’re in a pinch and need to take care of something right away.

  • Savvy Scot says:

    Yess! You are joining my movement 😀 Completely agree with all points on this post. Got some a bunch of sweet air miles, vouchers and cashback this year alone!

  • Jason Clayton | frugal habits says:

    I love using credit cards and get plenty of free stuff by doing so. My last free flight and hotel to Hawaii was by solely using my rewards credit card. A few months ago, my wife visited her sister in NYC by using points from our rewards card. For me, it is a no brainer – as long as you use it wisely.

  • DC @ Young Adult Money says:

    You can most definitely earn free things from using credit cards! That’s why I use them instead of my debit card or cash. With Discover you can even get free stuff on top of free stuff with the partner gift cards. For example you can use your cash back rewards to get a $50 chipotle gift card…but you only have to use $45 of your cash back rewards to get it!

  • John says:

    I didn’t know that about Discover DC. I’ve tended to stick more to Visa or MC myself.

  • Harry @ PF Pro says:

    For people that are already in debt, the first thing they should do is get rid of credit cards. No matter what people say, you always spend more with credit cards, even if it’s just a little bit more. But that being said, credit cards rock. You can get awesome sign-up bonuses, cash back rewards, etc.

    I take advantage of the credit card companies, I wouldn’t ever have it the other way around.

  • Kim@Eyesonthedollar says:

    I love credit cards for the reasons you mention above. I loathe credit card debt, and will never be that stupid again.

  • Jennifer Lynn says:

    I am an avid credit card user as Amex perks have saved me hundreds of dollars while traveling and Discover has an excellent cashback program. I prefer to focus on one card to reap the highest potential of benefits, and any card balance is immediately paid in full each month. When utilized wisely, credit cards are a powerful tool in one’s financial arsenal. The drawback: lack of anonymity.

  • John says:

    I totally agree, that when used appropriately they can be a great tool. It makes complete sense to focus on one that offers the best potential for rewards. Thanks for stopping by!

  • Listen Money Matters says:

    John, I think you explained my feelings completely. A lot of people are afraid of credit cards because of bad experiences but really, as long as you are careful they can provide a lot of benefits. Early concert tickets, massive cash back, etc… I love credit cards because I never pay any interest to them!

  • Chad@thstockmarketandi says:

    I like the ideas here. Credit cards are really just a bridge loan. It may take a few months to pay off. But with the right discipline, a very affordable and necessary part of life.

  • Simon @ Airline Miles Experts says:

    Credit cards in and by themselves aren’t bad. It’s our spending habits and irresponsibility in using them that give them a bad rap. If anything, well used, credit cards are excellent vehicles to build our credit, earn miles and travel free, act as emergency fund boosters when we are down, the benefits are many. The only caveat, one has to use them responsibly and securely.

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