Advice for the Moneywise: Use Your Credit Cards

Advice for the Moneywise: Use Your Credit Cards

Time and again financial gurus advice people to not stop using their credit cards. The mantra these days is to use cash. They say that if you do not have the cash to pay for something, then you are lying to yourself when you purchase something using your credit card. Lying to yourself, because you have convinced yourself that you can afford something that you cannot.

For the most part, I do agree with this point of view. If you cannot afford something. Then just don't buy it. However, taking this to the extreme, and thinking that buying anything using your credit card is a financial mistake is in itself, also a big mistake.

Obvious instances where this would be a mistake would be putting off buying something that you need for income generation. A good example of this would be if a freelance writer's laptop breaks down. If the writer does not buy a replacement at once, the writer loses more money during the days that he/she was unable to work, compared to the money he'll spend on paying for the laptop plus the interest charged by the credit card (assuming he can't pay the entire balance off in time for the due date). In short, it makes perfect sense to use your credit card if you know that the purchase will help you make more money than you will lose.

Another case wherein it would be a big mistake not to use your credit card is in paying your bills. Online credit cards offer automatic bills payment that will ensure that you never miss your bill deadlines. The effect of this is that you don't get saddled with penalties for missed payments but also ensures that the business and companies you deal with don't end up pinging your credit score and affecting your credit history negatively. Even if you do not sign up for automatic bills payment, you should still use your credit card to pay bills when you are cash-strapped to avoid missed due dates. Just make sure you make your credit cards due dates in this case!

Last but not the least is using your credit card for zero percent installment purchases, even if what you are buying is not an urgent need. If you want to buy something that you don't have enough cash to pay for in full but have enough to pay for in installment, go ahead and buy it using your credit card. There are 0 interest credit cards that let you make installment purchases interest free. Of course, moderation is still the key. Buy only something that you are sure you'll be buying in the future anyway if you had enough cash, and make sure you pay your bill on time.

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