How can you get more out of life by using credit cards for everything?
A few months back, my aunty got a call from her bank; someone in Texas had used her debit card to purchase concert tickets, a new phone, and a hot tub!
She was sitting in Hawaii just barely paying her bills as is and adamantly told them “no, that was not me!”
Her checking account was now negative. The bank asked her a few questions and then told her they would begin investigating. They canceled her debit card promising to mail her a new card within 2 weeks and froze her account until they could finish the investigation and return the charges.
She was scared and furious. Not only was someone trying to use her money for things she could only dream of, her bank actually froze her assets while they proved it wasn’t her.
Eventually, it all worked out, but whew, that was a hard few weeks.
Watching her go through that made me incredibly grateful that I almost never even touch my debit card and use my credit cards for practically everything.
If you are responsible with your credit usage and treat your card like cash, paying it off each and every month, then there are so many perks to using your credit card for everyday purchases instead of a debit card or cash.
Here are some of my favorite reasons to use a credit card:
Credit Cards Protect Your Bank Account
Unlike my Aunty’s debit card, which was directly connected to her bank account, credit cards offer a safety buffer between a point of purchase and your money.
When a purchase is made on a credit card, it is technically a loan from the credit card company. They agree to pay the vendor for the purchase and then bill you. Afterward, you pay off the loan via credit card payment. The people touching the credit card have no way to access your money on their own.
So those creepers who stole your card number can really only steal from the credit card company, not you.
Credit Cards Offer Great Fraud Protection
Shortly after my Aunty’s situation, I was checking my credit card bill, as I do at least every two weeks. A company that I made a $300 purchase from online had billed me twice.
Since I was on the credit card’s website, all I had to do was click the “Dispute Charge” button on my account. I simply told the credit card company what the disputed charge was and why I disputed it. They thanked me for letting them know, sent a message that they would investigate, and immediately credited the extra charge back to my account.
Bam, done. Introvert’s dream come true!
I didn’t have to call the vendor and go through the trouble of telling them they billed me twice. Nor did I have to make a case to the bank and get my accounts frozen for however long.
The big ol’ credit card company knows I pay my bills and went after them for me. No questions asked (besides the super simple explanation online).
Credit Card Rewards and Cash Back
If you’ve got good credit (How to Build Good Credit), there are so many opportunities to earn rewards on your everyday purchases.
By simply using rewards credit cards, we earn thousands of dollars a year in cashback and rewards.
Store Credit Cards and Cash Back
Three of our favorite credit cards are from Costco, Amazon Prime, and Target. These are the top places we do the majority of our shopping.
As Executive Costco members, we earn a combined 5% back on every purchase at Costco, 4% back on gas, 3% on restaurants and travel, and 1% on everything else. By the end of the year, we usually get around $700 back which can be used to pay for our membership, buy more groceries, or cashed out and put towards our Travel Savings.
Our Prime Rewards card earns rewards at Whole Foods and Drug stores as well as Amazon. With our monthly rewards, I am usually able to purchase gifts on Amazon and have them shipped for free to my mainland family members for birthdays and holidays with no out of pocket for me! (Happy Holiday, Happy Wallet)
The Target Red Card offers discounts and free shipping instead of cashback which actually works well for us island people who constantly need to pay for shipping.
There are also other cards available that simply offer flat-rate cash back, like our Chase Freedom and Credit Union cards.
Travel Rewards Cards
In addition to cash-back credit cards, we also use travel rewards cards.
Tons of groups discuss Travel Hacking to get free hotel stays or flights.
New card sign-up bonuses often include offers like 120,000 points for spending $3,000 in the first 3 months of opening the card. This is usually super easy to do by just using the card for your everyday spending: groceries, oil change, gas, dinner out, anything. Some people worry about needing to come up with NEW spending but no, just use it for everyday things.
These new card sign-up bonuses have gotten us free hotel stays for multiple trips. And if the hotel includes free breakfast, even better! We’ve been loving our IHG cards for the last 2 years getting FREE Holiday Inn stays.
After you’ve received the new card bonus, you can choose to stop using the card or continue to use it for more free travel.
I tend to close cards that have annual fees after I’ve used up the bonus reward. It may cause a temporary dip in my credit score by opening and closing cards a few times a year, but the rewards are worth it so long I keep my score high by doing the most important things: paying on time and keeping my debt to credit ratio low.
Build Your Credit Score
Using credit cards, if done correctly, can help increase your credit score. Credit scores are viewed for everything from being approved for future loans to being accepted for an apartment rental. So the higher, the better.
As long as you pay your bills on time each and every month and keep your usage rate below 20%, your credit score should steadily increase over time.
Pay Your Bills On Time
We pay off our credit cards every 2 weeks after getting paid. But I also sign up for autopay with all of my credit card companies. That way they automatically pull the minimum payment a few days before the due date to ensure I never have late bills, even if I’m sick or on vacation. And completely forget.
Then, I just come along twice a month and pay it off using the correct spending or Expected Expenses Account money.
Keep Your Usage Below 20%
Keeping your usage rate below 20% means never letting your total credit used to get above 20% of your total available credit.
If you have a credit card with a $5,000 credit limit, you preferably never want your balance to be more than $1,000. If it does go above, make sure to pay it down ASAP
Make sure to watch your credit usage to build your credit score. Learn more about Building Your Credit.
Credit Cards Offer Travel and Purchase Protection
Do you know how rental car companies offer insurance for an extra fee? Well, if you used a credit card for renting that car, your credit card might actually cover the rental car insurance for free.
One time, the brand new leather jacket my mom bought for my stepdad one year for Christmas was stolen out of the car in the mall parking lot, hours after buying it. If she had used a credit card, the credit card company might have covered it.
Did you miss that flight out of Chicago due to ice on the road making it impossible to get to the airport? The credit card company may reimburse you if you purchased that flight on a credit card.
Credit cards offer all types of protection for purchases made on the card. Each card is different, so it’s important to see what protection your cards offer. But they can save you a lot of money and hassle compared to using a check or debit card.
Wrap-Up
Credit cards can be excellent tools! They offer rewards, and protection, and can even help build your credit for larger loans, like a mortgage.
But as with any tool, credit cards need to be treated with respect. Just as a chainsaw can help cut down a fallen tree or chop someone’s finger off, a credit card can help offer you protection and provide cash back, or bury you under piles of debt. It’s all in how you use it.
If you’re looking to get more out of your money and have a healthy respect for credit, I’d highly recommend using credit cards for the majority of your purchases, like us.
But if you’re still having a hard time getting your finances under control, skip the credit cards for now and continue to build your strong financial base.
What do you think? Share your experience with using credit cards in the comments below and join the conversation.
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