Are Credit Cards Tools?

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Yesterday, I started this discussion about the dichotomy between credit lovers and credit card haters. Some people believe credit cards are evil, while others consider them simply to be tools.  Yesterday I covered the evil side of things, today the tools side of things.

The “Credit Cards Are Tools” Camp

I fall firmly into this camp. Before anyone attacks me, I have had credit card debt, twice. I entered into it knowingly because I wanted to buy groceries and put gas in my car. I did not spend lavishly or eat out frequently. My debt was the result of unemployment and underemployment the first time, and grad school the second time. I paid it off, and I didn’t blame the credit card companies for charging me interest. In fact, both times I took advantage of 0% balance transfers to manage my debt and pay it off faster.

So, the “Credit Cards Are Tools” camp argues that credit cards are financial vehicles that make life easier. They allow us to earn rewards, reduce the number of bills we have to pay, and carry less cash. The people in this camp are able to pay the balance in full every month, on time, without struggle. Let’s look at these arguments:

Credit cards make life easier.

Yes, that’s true in most cases. It’s easier to rent a car or hotel room or buy an expensive item with a credit card. Certainly you can’t shop online with cash – although you can with a debit card. However, cash is easier to spend at other places and it’s preferable for small purchases. And if you find the cards to be too much of a temptation to spend, then they make life very difficult. They also make life difficult if your wallet is lost or stolen and you have to call all the issuers to notify them.

Credit cards allow us to earn rewards.

This is true, they do. However, some rewards cards carry annual fees. They also charge higher interest if you fail to make a full payment, which pretty much cancels out whatever rewards you receive. Before you choose a rewards card, make absolutely sure you can pay it off.

We can carry less cash.

There have been numerous occasions where I’ve managed to go a week with about a dollar in my wallet. But I don’t recommend it. I try to always have at least $20 in my wallet, because you never know when the power will go out. Businesses always take cash. (Actually, this isn’t true. I tried to pay cash for my co-pay at the doctor, but they didn’t have change, so I had to charge it.)

Credit cards help us manage our bills. 

My husband are definitely in this group. We put all of our recurring bills (except loans) onto one credit card, which greatly reduces the number of bills we have to track every month. This was especially handy for me in the early days of online banking when my cable and phone companies couldn’t seem to process online payments without sending me a late bill. However, it’s a bad plan for people who carry revolving debt, because now you’re paying interest on your phone bill!

What I found most interesting was how entrenched these two camps were. There seems to be no changing anyone’s mind. It’s very similar to listening to Congress debate actually. So where do you fall? Are credit cards evil or are they tools? Do you fear credit or do you love it?

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