Should You Be Using Rewards Credit Cards?

Ready to ask yourself some questions (8 questions in fact) before using rewards credit cards? Stick with me for about 4 minutes of reading to know what’s right for you, and how to determine the best course of action for you and your mileage reward credit card.

You’re not going to get rich, by using a rewards credit card

I hate to disappoint you, but you’re not going to get rich and ‘work the system’ by using a rewards or airline card “well”.

You may be equally surprised to hear that I, do in fact, use one. That’s right – we use a credit card.

Can you still ‘win’ with money while using a credit card? Yes.

Does everyone? Heck no.  

In fact, most of us (myself included) have LOST with credit cards. Some of that time I knew full well that I was losing, and other times I thought I was beating the odds and working the system.

My history with credit cards

I got my first credit card in college.

My first CC had a $500 balance that I maxed out on a quick trip to the Northtown Mall in Spokane, WA. Then my broke self paid the minimum balance of $20-$25 each month, and then re-charged that same $20-$25 each month too.  Credit card company – 1, Sarah – 0

When we were first married, we got a joint credit card at Costco…because it was offering 3% cash-back and “free” membership when you shopped there.  Sold!  We used it for eating out, groceries, utilities…all.the.things! I was always shocked at the end of each month to get my balance, and having to take money from savings to cover the balance, as it was more than intended.  Credit card company – 2, Sarah – 0

With a bit more life experience under my belt and those initial credit cards in my life, we up leveled our adulting with a Home Depot credit card for…something, I honestly don’t know what right now – but I know it was 0% interest for X number of months; i.e. free money to borrow.  The fact that I don’t know what we purchased leads me to believe that we didn’t likely NEED it right then – and extended ourselves, even though we didn’t have any interest charges at that moment. Credit card company – 3, Sarah – 0

Those are just a handful of my credit stories, and I know we all have different experiences when it comes to using credit cards.  

Personal finance is personal.

Your stories are different, and your choice to use a card, and a recommendation for or against it is again – personal.

I coach some clients that prefer to use a card out of convenience, and have the self discipline to use it without overspending. I also encourage most clients to put their credit cards in a block of ice in the freezer, or even get rid of them altogether at some point. The choice – always yours. The advice…well, it all depends.  

Your personal credit card use

Consider these 8 questions before using your rewards credit cards…or any for that matter.

  1. Are you trying to eliminate debt? Or do you have an outstanding debt balance?

If yes, then utilizing a credit card right now is a slippery slope. You’re working to develop some new habits, live within your means, or tidy up some payments from the past. Don’t muddy the waters with credit card use right now. Stick with your debit card and work to pay off your balances. You can do it!

If not, then keep reading! 

  1. When you use a credit card, do you have the money to cover the balance in full?

If no, then you may be overspending. It’s SO easy to do with a credit card! In fact, that’s their goal – to have you spend more than you have, so that you accrue interest charges. If you don’t have all of the cash (money in your checking account) to cover your balance in full, then you are overstepping your reach.

Yes? Then keep reading.

  1. Do you use your card for convenience/necessity (not enough in checking right now)?

If yes, similar to the answer above – you may be robbing Peter to pay Paul. You don’t have enough now…but the bill isn’t due until next month, and you get paid on the 1st, so it’ll be fine. Until it isn’t, and something comes up that doesn’t allow for a full paycheck, or an emergency presents itself, and you have another priority. I get that it’s convenient – but sometimes..convenience has a cost.

If not, then keep reading.

  1. When you get your credit card statement, is it more than the amount you had planned to spend? 

If yes, then you need to do a little gut check here. Or..maybe it felt like a gut check when you opened up that statement balance email! Because of the convenience factor mentioned above, it’s easy to go beyond what you “thought” you’d spend. Friend, if you aren’t making a plan for your money, i.e. a budget, you will outspend what’s in your mind every time – because you don’t have guidelines and boundaries for your expenses. 

If not, then keep reading.  Obviously, you all can keep reading regardless of your answer – but you see where I’m going here.

  1. Do you use your credit card for emergencies?  

Yes? This is the age old reason for why we have a credit card. It’s just for emergencies. What is an emergency? New tires for your car when they were so bald that they needed replaced? It sounds like it – but, did you know that they’d be needing replacing? Saving up $75 per month would have covered those $600 tires in 8 months. Or 2 months of $300.  

Don’t get me wrong – emergencies do happen. I get it! I will advocate 100% of the time for you to have your own savings emergency fund, not the emergency credit of a card. That card may feel like a blessing in the moment, but that blessing is going to charge you interest and likely cost you 25% more than the original emergency.  

If not, keep reading.

  1. Are you opposed to carrying cash or using your debit card?

If yes, explore that a little bit longer. For what reason? Inconvenient to get cash? It is, but does it help give you boundaries with your spending? Sure does. And, debit cards are just as convenient as credit cards…it just requires that you have the money before you do the spending.

If not, you know the drill. 

  1. Do you have a ‘fear of missing out’ on “free” rewards, mileage points, and other perks?

Yes? We all love a good bargain, and the enticement of ‘free’ stuff’ is powerful. It gets at our inherent desire to win the game, provide for your family, and so much more. If you get caught up in this, ask yourself a few key questions. Is it worth putting $100 on this card right now for the $1 cash back I’m going to get? If you have the money set aside to pay for it…maybe it is. But if you don’t – let me ask that question a different way. Do you want to spend $100 right now that you don’t have to get $1 back or X number of miles? Essentially, you’ll be out $99 in trade for a thing that you may or may not need right this moment.

If not, and you can take it or leave it with those rewards – keep reading.

  1. Are you able to tell yourself ‘no’ when something comes up, and you don’t have money set aside?

Yep, I saved the best for last! If you struggle with telling yourself ‘no’ for whatever reason – like, “I’ve worked hard lately”, “I deserve it”, “I don’t want to miss out”, “I’m tired”, etc.-you get the picture. You are borrowing trouble my friend! Working through this level of self control is tough (I speak from experience – both with money, and with food. I’ve mastered one, but not the other yet).  Money matters do require self control, and practice – never perfect. 

If yes…and all of your responses land in the second instead of the first paragraph – you may be in a safe “zone” to use a credit card.

A recap for you for the 8 questions to ask yourself before using rewards credit cards.

  • You don’t have any credit debt or card balances.
  • You have money in your checking account intended for your credit card purchase.
  • You can cover your statement balance in full, as expected each month.
  • You have an emergency savings fund.
  • You are willing to use cash/debit card to keep your spending in check.
  • You acknowledge that the perks of a card are nice to have, but not needed.
  • You tell yourself no when you don’t have the money planned for a purchase. 

More often than not, credit card use exaggerates our present state of being. It robs us of our future with months and even years of payments, and interest charges that are often out of this world expensive (a convenience charge that keeps you from getting ahead and funding your future).

Ok, I know this has been quite a bit of info, but I also know these questions to ask yourself before using rewards credit cards are vital too! Before we wrap this up for the day, we need to talk about using a credit card to increase your credit score. It’s true that having or getting good credit requires “credit” use typically. But..it doesn’t have to be a credit card, and there are a lot of factors involved. The number one credit impact? Paying your bills on time.

Again..personal finance is personal.

My family’s credit card usage

We use ONE credit card.

For us? We have one credit card, a Costco Citibank Visa. The balance is paid off in full each month, and I track what we’ll be charging. We use it to charge travel expenses, gas, a few utilities, and other planned purchases. We get a rebate each year that covers the cost of our accountant (just so happens it’s the right timing for that bill) and a trip to Costco. They’re the real winners here. ?

The decision to use a credit card isn’t mine to make for you-it’s yours. But as your Coach (IRL or just on the interwebs), this is exactly why I wanted to dive deep here, and help you consider these questions to ask yourself before using rewards credit cards. You may not always like my line of questioning, but know that it comes from a place of genuine care.  Like from your best friend..in finance.  

Sarah is a Ramsey Preferred Coach
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