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Cash or Credit?

January 15, 2009

Piggy Bank, originally uploaded by da100fotos.

A lot of very smart people will tell you that you should never get a credit card and if you have them you should cut them up immediately. I’m (N.) not one of those people. I’ve had a credit card since junior high and I have never wracked up a monthly bill that I couldn’t pay in full. And no my parents aren’t rich and neither are J. and I. My mom knew the best way to teach me to manage my money was to let me have it (in very small amounts) and budget it. I had a credit card (really a card with my name but attached to her account) and a checking account in high school. My weekly allowance was deposited into my account and I had to live on that money by either cash or credit. If I wanted more than my allowance I knew better then to overspend. My mother believes if you dig your ditch you can lie yourself down in it. And that’s not to say she’s uncaring because she’s just the opposite but she wanted to raise an independent and responsible child. It amazed me how many of my friends and classmates astounded by the sudden “freedom” of easy credit got themselves into thousand of dollars of debt before our first semester of college was over.

When I got my own credit card account before leaving for college I researched various offers online and decided on a Capitol One Reward Card. At the time you got points that could be redeemed for gift cards or merchandise. I figured I might as well make something from spending money since I paid it off every month regardless. And that’s the key to having a credit card. If you can pay it off every month then to me there is no reason not to get a reward card. Not only that but you continue to make money off your own account until it’s time to pay the bill versus letting someone else collect interest.

A couple years after getting the card they eliminated the rewards program but I figured I would keep the card to maintain a stable credit history. The next card I got was two years ago. My friend T. had a United Air Miles Credit Card and was getting at least one free companion ticket a year. Well I thought since I wasn’t getting any rewards on Capitol One I would switch to using United. I kept the Capitol One card and locked it up, literally for an emergency such as my purse getting stolen which subsequently happened but that’s another story. Unfortunately I haven’t gotten a single freebie for using United although thanks to all my business travel I have collected enough points for a free ticket. When J. and I do decide on our honeymoon we’ll save a significant amount of money by using that ticket.

Now I’m going to stop using the United card because a year ago (I think) Capitol One said they were re-instituting the rewards program only this time you could get cash. It seems that now a days more and more credit card companies are offering cash as a reward and I don’t know why you wouldn’t do it. Even if you only use it for gas and groceries it still adds up. My 20,000 points would get me $40. Of course I could get a $50 gift card at various stores for only 15,000 points but it’s no surprise they would prefer not to give you cash. Now I realize in your regular day to day life this may not add up quickly but why not. You would be surprised at how many points you can collect if you point every single thing (or as many as possible) on a one card. That’s key as well, you have to maximize the opportunity by only using one reward card. I have the added benefit of being able to charge my business expenses on my credit card. I get reimbursed within a week from my company and the money usually sits in my account accruing interest until the bill is automatically paid on the due date. In fact my company has wised up to this and issued us all gas cards. I imagine they are getting some cash or reward for this program which is okay by me.

Do you use reward credit cards? Why or why not?

4 Comments leave one →
  1. Barbara permalink
    January 15, 2009 5:39 am

    We have a Mastercard that we basically use as a
    debit card – that is, we put all our purchases on
    it and pay it in full every month. We get points
    towards various rewards (appliances, hotel stays
    etc.). I’m happy to do that as long as long as the
    yearly fee is reasonable and we don’t have to
    pay any interest – so far we’re getting a lot better
    deal from them than they are from us! We don’t have
    any other credit cards – store cards aren’t as
    widely used in Australia as in the US and we got rid
    the two we had many years ago.

  2. January 15, 2009 8:41 am

    I do not have any credit cards due to screwing up in college with one. If I can’t pay for it out right I do not need it is the way I look at it. But my debit card is a rewards card. I cashed in my points before Christmas and used the gift card I got to help buy presents with. I love it!

  3. January 15, 2009 10:07 am

    I find it much easier to keep track of my money when I put it all on the credit card and only have to pay one bill each month (in full of course).

    We have the Chase Freedom Card and it’s fantastic. Cash rewards, and if you save up your rewards to $200 they’ll send you an extra $50 just for being patient. In 2008 I was able to get $750 from them in rewards!

  4. jacquelyn permalink
    January 15, 2009 8:15 pm

    I have a reward card with no annual fee. I use it for everything, and when I reach enough points to where it is advantageous to cash it in, I do. I think I made about $750 off it last year.

    I pay it off in full every month.

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