No, credit cards are not evil
A little over a month ago, my husband and I were getting ready for a five-night trip to Jamaica. And as usual, we went to great lengths to budget for anything and everything. For starters, all but $97 of our airfare was paid with points I earned with my Chase Ink Bold Business Card, and that expense was taken care of months before. The fact that we were staying in an all-inclusive resort also meant that I didn't have to budget for meals either, an added perk. The only expenses left to consider: round-trip transportation to and from the resort and money for tips. Once that was taken care of, I looked forward to a week of fun, mojitos, and beach time with my best friend.
When bad weather attacks
So we left and didn't look back. Unfortunately, we were totally unaware that a giant snow and ice storm moved in right after we left, burying places like Charlotte, N.C., the city to which we were supposed to fly back. But we weren't worried. Hell, we were having too much fun to concern ourselves with the problems of the world. That was, of course, until it was time to leave and we hopped on the computer to check in for our flight.
What's even worse was that the same flight was cancelled the next day too. And after calling the airline and finding out that all flights were full or cancelled for the next two days, we did what we had to do. We ponied up the cash for two more nights at the resort to the tune of $520, which was much more than what we paid to begin with. Ouch.
Even though it was slightly demoralizing to spend more than we planned, I secretly hoped that I would get reimbursed for those expenses. How, you ask? I was pretty sure that the Chase Ink Bold card I used to pay for our flights offered free travel insurance as a benefit of owning the card. So, when I got home, I immediately called Chase and inquired. They then mailed me a claim form which I filled out and mailed back, along with all of the requested documentation. The verdict: They sent me a check for $582, completely covering our additional two hotel stays and lunch and dinner on the way home.
The perks of paying with credit
Travel insurance is just one of the oft-ignored perks of paying with credit. Some other rarely mentioned advantages include things like price guarantees, return protection, free extended warranties, theft, breakage and loss protection, and roadside assistance. Another big one: Fraud protection. I wrote about being the victim of a moving scam late last year, and one thing I wasn't able to mention at the time (because it hadn't happened yet) was that the same Chase card's fraud-protection coverage refunded the entire amount I was overcharged. This left the scammy company and the bank to work it out among themselves, which was a huge relief for me at the time.
Of course, some of the biggest perks of using credit come in the form of points and miles, something that I talk often about as a staff writer for Frugal Travel Guy. It's true that when credit is utilized in the right way, it can become a powerful tool for earning perks like international and domestic travel, gift cards, and cash back. But to get there, you have to make credit work for you, and stop letting it work against you. This does require a certain level of discipline, but the benefits can't be underestimated. Just ask anyone who has traveled the world for pennies on the dollar. They'll tell ya.
No, credit cards are not evil
Credit-card use is such a controversial topic, and for good reason. Ask anyone in debt and they'll tell you just how easy it is to charge up a card without even realizing it or to fall on hard times and resort to using credit for everyday expenses. When almost everyone you know has had some sort of run-in with unruly credit-card debt, it's easy to assume that credit cards are the culprit that must be avoided at all cost. Personal finance gurus like Dave Ramsey perpetuate this belief by making blanket statements about the use of credit, like this one:
“Responsible use of a credit card does not exist. There is no positive side to credit card use. You will spend more if you use credit cards.”
Although I haven't found that to be true in my personal experience, I think it's sound advice for people who have run into problems in the past. But I don't think that the same rules should apply to all of us. Obviously, plenty of people use credit responsibly, and they do so without any harm to the credit or their wallet. How? They make credit work for them.
Become your credit card's master
Fact: Credit cards are not inherently good or bad. They are a tool, and it's up to you to decide to master their use for your benefit or let credit card debt become your master. Your choice, but I would personally choose the former. If you want to get all of the benefits from using credit without all of the headache, here are a few tips that can help:
- Use your statement as a budgeting tool — The fact that you're using credit can actually help your monthly budget if you play your cards right. Start by signing up for an online account, then use your statement to track your spending in individual categories.
- Avoid credit card fees –– In order to benefit as much as possible, it's important to avoid paying any costly and unnecessary fees associated with your card. This means paying on time to avoid late fees, and making sure to weigh the pros and cons of any annual fee you're asked to pay.
- Never pay interest –– No matter what you do, don't pay interest. Make sure that you only put your regular expenses on your card, and pay them off before they are due each month. Remember, paying cash hurts, and it should hurt. The same rule should apply to charges you put on credit.
- Don't chase points and miles — The fact that you're earning cash back or miles for your purchases is a good thing, but don't use that as an excuse to overspend. The points and miles should be a benefit of card ownership, but it isn't beneficial to buy things that you wouldn't have bought otherwise. Remember, you want to be your credit card's master, not the other way around, right?
How do you feel about credit cards? Do you think they are inherently evil or do you make them work for you?