Credit Cards

This is a pretty controversial topic in the money saving world. I know many financial advisers recommend that you stay away from credit cards, and if you are absolutely unable to control yourself with a credit card, then yes, just scroll past this post, because this one is not for you, BUT, if you think you would be able to handle your spending, then hear me out. I am 100% for credit cards if used responsibly. In fact, I use my credit card every chance I get. I know I sound crazy, but like I said, hear me out.

Let me start by telling you the two HUGE benefits of having one.

1. There is this thing called ‘credit’ that every person has. I will never understand how they come up with the numbers, but it is very hard to make a big buy (such as a house) without having good credit. Also, the better your credit, the lower your interest rate. One way to build your credit is to get a credit card. (Side note: it is possible to have awesome credit at a young age. Daniel and I are in our early 20's and are both in the highest bracket of credit that you can have.) We have only been actively “building credit” for 3-4 years.

2. Credit cards are targeted for the people who don’t know how to control themselves with it. Companies lure you in with all these awesome deals like “get 3% cash back on all your purchases” or “get x amount of frequent flyer miles for every dollar you spend.” Usually these credit cards also have a ridiculously high interest rate. I would never ever use a credit card like this for purchases that I don’t plan on paying off at the end of the month.  As a frugal, controlled spender, I use the awesome deals they offer to my advantage. This can save you a TON of money if you do it right.

Ok, so here’s how I control myself. The MOST important thing to remember when having a credit card is that you have to think of it as if it were a debit card; meaning, you are not able to spend more than you have in your checking account and what is budgeted. I use mobile apps for both my checking account and my credit card and check them daily to make sure that I am not over spending. My last post talked about using the envelope system. I know people who have physical envelopes with cash in them, but to utilize my CC as much as possible, I have an app (Good Budget) on my phone that tracks it all, so I can use my credit card the same way as cash and just deduct it from my “virtual” envelope. Sounds simple, right? I will warn you that it does take some work and consistency. It is easy to forget to add your purchases to the Good Budget app (guilty!), but if you are able to keep up with it, the benefits are pretty substantial.

We have a Southwest credit card. I have found that out of all the airline cards, Southwest has the best deal. Their frequent flyer miles never expire, it cost less FF mile to buy a ticket, and you get two bags checked free. Plus, I have only ever had AWESOME experiences flying with them. It does have an annual $100 fee, but it is worth it. Once or twice a year, they have a deal where you can sign up and if you spend $2,000 in the first 3 months, you get $50,000 bonus miles. Last summer, we were able to buy all of our plane tickets for $5.95 each (basically just tax) with the bonus miles. Also, if you are married, you each can get a card and each qualify for the 50,000 bonus miles. I signed up for the credit card last year, and we both were able to use the card. We got the 50,000 points and used them last summer. I also have a ton of points from spending throughout the year that I have bought random plane tickets with. This year, Daniel signed up for the card, is getting 50,000 bonus miles (for our plane tickets this summer) and we plan to cancel mine and spend only on his card. He also used me as a referral so I got 5,000 bonus points to my name. Woah! So basically within the last 2 years we will have gotten 105,000 points just in bonus miles, just for signing up. A one way ticket averages 12,000 points. That is almost 9 one way tickets. We have taken advantage of other offers throughout the year too where they give bonus miles. We have gotten close to 150,000 miles overall. So there is my Southwest plug for you. I could go on and on about how good of a deal this is, but you get the idea.