Paycheck Chronicles

Should You Pay With Credit Cards?


Should you pay with credit cards for shopping, utilities, vacations, and more?  It’s a common question, but the answer is very personal.  The right answer for you depends on a wide variety of factors.

Are You Paying Off Credit Card Debt?

If you’re trying to pay down debt, then you should not be using credit cards for purchases.  Because of the way that interest is calculated on credit cards, even if you spend and pay the same amount in a month, if you don’t get down to a zero balance, you’ll still be paying extra interest because you’re using the card.  Don’t sabotage your debt payoff by using the cards as you go!

Do You Have Self-Discipline?

Do you ever leave a balance on your credit cards at the end of the month?  Do you find that you spend more when spending with credit? If you can honestly answer no to both of those questions, then there might be some good reasons to pay with credit.  If the answer to either question is yes, then think carefully.

For myself, I have discovered that there are certain situation where I do overspend if I am paying with credit.  While I generally am pretty frugal, there are some times when I don’t pay quite as careful attention if I’m not spending cash.  For example, we went to a happy hour with friends a few weeks ago.  I opened a tab with the bartender, and signed the bill at the end of the night.  I am almost positive that I would have turned down that one last beer if I had been peeling bills out of my wallet.  That would have been a great time to pay with cash!

Are There Benefits To Using A Card?

In some situations, there are significant benefits to using a particular credit card for a particular purchase.  For example, your credit card may offer extra travel insurance if you purchase airline tickets with that card, or there may be some sort of rebate or bonus for card holders.  For example, we took a cruise last year and we received several benefits because we paid with our American Express card.  We charged the cruise to the card, and turned around and paid the bill immediately.

Are You Earning Rewards With Your Cards?

If you pay your bill in full each month, and you can resist overspending when you use your card, then you may find that you can earn valuable rewards by paying your bills with a credit card.  For example, I pay most of our family’s monthly expenses with a credit card, and I cash in the points each year to pay for Christmas gifts.

This strategy is not worthwhile if you will carry a balance or will overspend by using credit cards.

Every situation is different, and there is no right answer.  Most importantly, be sure that the decision to use credit cards or not is made as an actual decision, not just habit or whatever is easiest.

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