Contrary to the opinion of most financial advisors, I think credit cards are the bee’s knees and honestly believe that some people should use them more often. I don’t think they’re great for everyone, obviously, but if you already have enough self control to not over spend your credit, you might actually end up saving money in the long run.
In my case, I use my credit card for practically every purchase I make. Why? There are two reasons really. The first is that it’s easier to keep track of where my money is going. I use iBank* on my computer to categorize all of my purchases and to keeps tabs on my investments and accounts. Using my credit card to buy everything means all of this information is centralized in a single spot (which isn’t surprising because that’s what centralized means). The great part is that I can download this information from my bank’s website and input it straight into iBank where it categorizes most of my purchases based on previous purchases I’ve already categorized myself. The process isn’t perfect, but it beats having to input this information manually — which is what I’d have to do if I was using strictly cash. Using your debit/interact card allows you do this as well, but I’m not a fan of debit for some reason.
Before I move onto reason 2, however, I want to stress just how useful it is to be able to visually see where you’re money is going. Programs like iBank and Quicken can produce graphs and pie charts with just one button click. It’s hard to deny that your penchant for expensive gourmet coffee eats up a third of your monthly budget when a pie chart shoves the fact in your face, and in pretty colours too. It can also serve as positive reinforcement when you see your savings line go up (hopefully) over the span of months and years; you literally get to see the results of your hard work. So if you haven’t already started to track your finances using a personal financial program (like iBank or Quicken), I really recommend you start now. It’s a great investment.
Reason numéro deux is probably the main reason why I love using my credit card: the perks. A lot of credit cards today give users incentives to encourage them to use their cards as much as possible. For example, some offer Air Miles while others give you free movies tickets to see movies (surprise!) at your local cinema. In my case, I just get cash back. Depending on what I buy, I can get as high as 4% back on my purchases — which is paid out to me at the end of each calendar year. Things that give me cash back include gas, groceries, pharma, etc. Even monthly bills, charged to my card, get a discount. It’s surprising how quickly it adds up too. I’ve had my new card for just a little over 2 months, and I’ve already accumulated around $150 in cash back rewards. That’s almost $1000 a year of free money.
Of course, if you have problems paying off your credits cards at the end of each month, you probably do not want to try this (actually you don’t want to try it, but I don’t want to tell you what to do). If you’re already in the habit off paying off your cards before any interest accrues on your balance, however, then you really should consider shopping around and find a card that has some kind of perk when you use it — whether it’s free airfare or popsicles. Whatever you determine to be the most useful for you.
*As a side note, I’m not endorsing iBank; it’s just pretty much the only option out there if you’re on the Mac platform. That being said, I find it pretty good for most things… and for those things that it doesn’t do, there are usually work arounds.