Credit Cards: 3 Rules to Use Them WiselySýnishorn

Credit cards are kind of like chain saws. A chain saw is a relatively dangerous power tool that hurts a fair number of people each year. But when I need to chop up a big tree, I use it responsibly and it provides a lot of benefit. Like most tools, I can use it for my benefit or, if I’m not careful, my harm. Would I loan my chain saw to just anyone, not knowing whether that person could use it responsibly? Not at all. The same should be said about credit cards.

Because of the potential of harm from credit cards, some tend to think that credit cards are inherently evil, but they aren’t any more evil than mortgage companies, credit unions, or student loans. They are simply one of a variety of financial tools available to us today that, if used, need to be used wisely. Any tool you use, including a chain saw, should improve your life, not harm you. If you can use a credit card to improve your financial situation, then continue to use it wisely. If not, then lose it and use a different tool. Should you choose to use credit cards, then I recommend following our family’s 3 rules to help you use them responsibly.

Before we dive into rule #1, I should say that we use a debit card for most of our day-to-day expenses because we use the Real Money Budgeting method.

But we also responsibly use a credit card each month as well. At this point we are 100% debt-free (including having paid off our mortgage), and my goal is to never pay a dime of interest for the rest of my life. These rules help ensure that I reach that goal while also getting some of the benefits credit cards offer.

Rule 1: Don’t Use Them for Discretionary Expenses

The truth is you are likely to spend more with a credit card than you would if you were using cash. The trick to prevent this is by creating a system to ensure that you don’t. One way we do this is by never using credit cards for discretionary expenses. These would be things that tempt us to spend more than we should. In our household, these expenses include eating out, clothing (for Linda), Lowe’s (for me), groceries, and household goods. Instead, we use our credit card only for non-discretionary expenses, such as the internet bill, insurance payments, utility bills— you get the picture. When we use it this way, we maintain control of our spending because there isn’t ever any temptation to spend more than we should.

Most people who find themselves with loads of credit card debt got there because they used their cards for discretionary expenses.

By simply following this rule, you can cut it off at the root.