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Just got back from FinCon. Of course I told everyone how I like to travel using credit card points & miles. Within the personal finance/FI/RE community, I was shocked how many people still don’t have credit cards.
And these are people who delight in number-crunching!
I understand the concerns about mismanagement, overspending, or accidentally missing a payment. But fact is, credit cards are part of adulting because your credit score is part of adulting.
Responsibly using credit is a sign to lenders that you qualify for lower rates and higher lines of credit. You can’t even rent an apartment without a credit check these days.
And if you’re counting every penny, you definitely want a credit card. Because you can get back 2% of everything you spend. For completely free. Why wouldn’t anyone want that?
In This Post
No annual fee credit cards are a no-brainer
My generation graduated college into a nonexistent job market because of the 2008 recession. I worked retail jobs, served tables, and poured drinks until I eventually found a staff job after months of sending job applications into the black hole of the internet.
For a long time, I innately distrusted money. After months of piecing together rent payments, there was no way I could afford a single misstep. One mistake would mean $100s of dollars in late fees – and I didn’t have it to throw away.
I knew credit cards, with their late payment fees, interest rates, and generational reputation, were prime evil. When I got my first one, I treated it like an animal that would turn on me at any second. I was terrified to mess it up.
Over the years, my attitude changed. I enjoy being in touch with my finances. My credit score hovers around 800.
I got a great rate on my first mortgage, and on an auto loan last year. My credit limits are high and utilization low. I pass every credit check with flying colors.
I’m not afraid of credit cards any more. Now, I make them work for me.
1. You need credit
If you ever want to:
- Own a home
- Rent your own place
- Buy or lease a car
- Get high-level jobs
- Refinance student loans
- Open a personal loan
- Cosign for your kids or family…
Then you need a credit score. That’s only built by using credit lines responsibly. Opening a card with no annual fee is the easiest way to start building credit, even if you only charge something small and set up automatic payments every month.
Sooner or later, you’re going to need a good credit score. The earlier you begin, the better.
2. They offer protection
For consumer purchases, you get way more protection with a credit card than you do with a debit card. Some credit cards even offer price protection and extended warranties. If there’s fraud on your account, you’re NOT liable for the damages.
Debit cards are a direct link to your bank account. The second you swipe them, the money comes out. Credit cards offer a buffer should your card number fall into the wrong hands.
3. Better cash flow
When your credit card statement closes, you legally have a 28-day grace period to pay everything back in full. If you get paid every couple of weeks, there might be a few days per month when things get tight. Having a credit card – THAT YOU KNOW YOU WILL REPAY IN FULL – can give you better control of your finances.
I personally have internet, phone, Netflix, Spotify, insurance, electricity, and a couple of other services set to autopay. If those were randomly coming out of my checking account all month, I’d be a nervous wreck if my balance got low.
I much prefer to watch it roll in so I can strategize about when checks are coming in and when I can repay. If you can’t handle the payment cycles, try a service like Debitize that turns your credit card into a debit card.
4. FREE MONEY
Seriously! Imagine if you got 2% cashback on everything you spent. $2 back every time you spent $100. Over the course of a year. With a card that’s free to get and keep. It all adds up!
I wrote about my adventures maximizing cashback with Discover It cards.
- The first year, I got $2,368 back
- The second year, I got $2,226 back
- And this year, the third, I’m getting $1,043 back
Just for using the card regularly in the bonus categories, I’ve earned $5,600+ and never paid a single dime of interest or a fee to have the cards.
I’ve gotten $100s in free Roth IRA contributions with my Fidelity Visa, which earns 2% cashback on every purchase and has no annual fee.
And my Chase Freedom card has been a never-ending source of valuable Chase Ultimate Rewards points thanks to 5% cashback categories that change each quarter.
|Chase Freedom||15,000 Chase Ultimate Rewards points|
|• $0 annual fee||• $500 on purchases in the first 3 months from account opening|
|• Excellent rotating 5X categories every quarter|
• A great first Chase card
|• Compare it here|
Not using a free credit card to earn cash rewards is literally leaving free money on the table. Even if you don’t earn a lot, why say no to free money?
Money is a tool – and you can use it to make more
I love managing my money. I love looking at my balances, moving it around, and making it work for me. Multiple accounts at different banks don’t phase me.
Why? Because money is a tool.
Money exists to bring you things that make you happy. And like any tool, it’s neither inherently good or bad. But the more skilled you are, the more finely you can sculpt your life, your reality, your future.
Some peeps think “money” is a dirty word. They don’t like watching it flow in and out. And they make careless mistakes that end up costing them… more money.
But you can NOT live without money. You have to pay for where you live, exchange dollars for food, and find a way to get to work.
And while, yes, credit card companies prey on carelessness, when you pay attention, you reap the benefits of a credit score, free cash rewards, consumer protections, and better financial control.
If you want to know anyone’s true passion, look where they spend their money. That will tell you exactly what they value. The sooner you get comfortable with money, the sooner you can start earning free cash. Even – and especially – if you’re frugal!
This subject is near and dear to my heart. And it pains me to watch people paying with debit cards. I understand the “evils” of credit cards. But why say no to free money? If anything, use it as encouragement to manage your finances better.
Once you get comfortable earning rewards on one card and with your higher credit score, you’ll find things begin to flow more easily.
If you have to spend money anyway – which everyone does – get rewarded for it! Here are cards with no annual fee and others with cashback rewards. After a few months, you might be surprised at how much cashback you accumulate. Getting comfortable with credit is one of the best – and most rewarding – things you can do for your future.
BEST Current Credit Card Deals
- Chase Ink Business Preferred - Earn 80,000 Chase Ultimate Rewards points and 3X bonus points for travel, internet, cable, and phone service
- Chase Sapphire Preferred - Earn 50,000 Chase points with the BEST card for beginners
- Amex Blue Business Plus - Earn 10,000 Amex Membership Rewards points and 2X bonus points on up to $50,000 in spending per year with NO annual fee