Smart SpendingSmart Spending

Why you should use a credit card

There are those who think credit cards are nothing less than a road to financial disaster. They're missing out.

By MSN Money Partner Mar 8, 2013 11:58AM

This post comes from Len Penzo at partner blog Len Penzo dot Com.


Len Penzo dot Com logoWhen I was a kid, I had a Ouija board.


Image: Credit card Computer (© Stockbyte/SuperStock)Thankfully, my nerdy friends and I were never possessed by evil spirits while conjuring up our dead relatives to see how they were doing (they're fine, thanks) or getting answers to burning questions like whether or not certain members of the junior high school cheerleading squad had the hots for us (they didn't -- at least not for me).


Even so, I know a lot of people who insist that Ouija boards are evil and should be avoided at all costs.


There are also folks who refuse to carry credit cards because they feel they're just as sinister as Ouija boards. Fair enough.


I understand that credit cards aren't for everybody, but I think they're a good thing. I've been using credit cards for more than 25 years without a single regret.


Of course, like many things in life, credit cards are a double-edged sword. So the decision on whether to embrace or eschew them comes down to understanding why you should and shouldn't use them.


Why you should use credit cards 

Credit cards provide us with the privilege of responsible short-term borrowing. Yes, they can be abused, but when used wisely and responsibly, credit cards provide valuable benefits, including:

  • Convenience. With plastic, there's no need to carry wads of cash with you everywhere you go.
  • Peace of mind. Unlike credit cards, if you lose your wallet, the cash in it is gone forever. Worse, those seen with large sums of cash are more vulnerable to being robbed. I hate being robbed. In fact, it's happened to me twice.
  • Expense tracking. Credit card companies send monthly statements of all your purchases that make it very easy to track your expenses.
  • Consumer protection. How many times have you bought something on the Internet and never received it? Or didn't get what was advertised and the merchant refused to give you your money back? A simple call to your credit card issuer is usually all that's required to fix the problem.
  • Insurance benefits. Often, credit card companies offer product insurance if an item is stolen, and many offer free rental car insurance.
  • Extended warranties. Some credit card companies will offer extended warranties on certain items.
  • Credit history. When they're used responsibly, credit cards help establish your credit history and build your FICO scores,  which is especially valuable if you need longer-term credit extended to you. Those with high FICO scores get the most favorable interest rates, which can mean savings of tens or hundreds of thousands of dollars over the life of a loan.
  • Rewards. Whether it's cash back, airline miles, free gasoline or other incentives, plenty of credit cards offer rewards. I've received thousands of dollars in cash and other perks over the years by simply using my credit card to make purchases.
Why you shouldn't use credit cards
  • You're financially undisciplined. If you're unable to control your spending, a credit card is definitely not for you.
  • You're unwilling to pay off your credit cards in full each month. Two of the most important benefits I mentioned as reasons for using credit cards, establishment of credit history and credit card rewards, can be neutralized -- or worse -- if you start to carry balances from month to month.
  • You feel credit card companies are morally bankrupt. Some folks believe credit card companies take advantage of consumers. If that's you, then it makes little sense to keep one in your wallet.
  • You're personally irresponsible. If you're unwilling to accept the terms you agree to when you sign on the dotted line -- whether you read the contract or not -- then you'll be much better off sticking with cash.

Yes, credit cards can get careless people into a lot of financial trouble, but that's no reason for responsible people to eschew them, any more than it makes sense to avoid using knives because they're potentially dangerous.


So there you have it. Hopefully, I've explained the pros and cons well enough to help you make an informed decision.


And, after all that, if you still find yourself unsure about whether or not credit cards are right for you, well, you can always try consulting a Ouija board.


More on Len Penzo dot Com and MSN Money:

Mar 8, 2013 4:22PM
Try traveling without a credit card.  Rent a car? Reserve a hotel room?  Buy a plane ticket without a lot of hassle? Try doing either or those without a card.  I use my cards for most EVERYTHING (gas, groceries, utilities, etc.), pay off the bill monthly and fly to Hawaii and/or the Caribbean several times a year on airline rewards miles.  I laugh at the jokers who get money out of the ATM in the deli to pay for a sandwich.  How much are they paying in ATM fees for that $20?  When it comes to buying a house, having credit cards and paying the bills promptly will help establish credit towards qualifying for a mortgage.  I don't like to carry a lot of cash or go to the ATM at night. 
Mar 8, 2013 4:22PM

I always use credit cards because it's simply cheaper then paying cash.  If it costs $50 to fill up my truck with gas and I pay with cash, I will have to pay $50.  If I pay with a credit card, it will only cost me $48.35.  It may be a small discount, but that adds up over the entire year with all my purchases.  I pay off the balance each month so I never have to pay interest


I only pay cash when I'm penalized for using credit.  My local DMV is an example of a place that charges 5% to use my card.  So in that instance, I will pay with cash.  However, those occurrences are few and far between.


It's no coincidence that the people who claim credit cards are bad are the same people who don't know how to use them correctly.

Mar 10, 2013 5:54PM
We use no-fee cash back cards, and they are great! Amex gives us back 3% on groceries, 1% on all else. Our Visa card gives us 3% back on gas and 1% on all else! What's not to love? Pay the cards off each month, make hundreds a year on cash back! Enslaved? Afraid of high fees? Not hardly, not using cash back cards means you're leaving money on the table that's rightfully yours. We get paid to use cards, we now try to charge almost all our purchases. Plus, if you have your cash back card with Bank of America, they will pay you an additional 10% if you have the cash back reward deposited to your savings or checking account. A very good deal.
Mar 9, 2013 1:38PM

I get lots of rebates with my cards.Free miles, cash,etc.As long as you pay it off monthly

it`s great.

Mar 8, 2013 3:51PM
LMAO...I'm not "missing out" on anything except paying interest to the thieving, carpetbagging bankers. And, by the way, I'm not financially undisciplined or personally irresponsible. I simply refuse to be enslaved.
Mar 11, 2013 1:06PM
1%-5% cash back for money I going to spend anyway? You would have to be an idiot not to use a credit card.
Aug 10, 2013 5:43PM
Hey I started a new blog called Easy Ways to Save and Make Money. Here's an article about making money off credit cards. Check it out!
Mar 9, 2013 3:32PM
I'm gonna max my cards out to the limit...just like our elected representatives in Washington (NOT) !!!
Mar 8, 2013 6:06PM
Put your money in the bank and use a DEBIT card. Works just like a credit card but you are using YOUR money ,not borrowing at 20% interest.That way you don't have to carrry cash and still can get  a rental car,airline ticket,buy online or whatever.
Mar 11, 2013 11:17AM
If you are refinancing a house or buying a car, you will want to minimize any credit card purchases until settlement.  It will affect your credit score and potentially the rate that you are offered.  You could also be denied as high risk.
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


Smart Spending brings you the best money-saving tips from MSN Money and the rest of the Web. Join the conversation on Facebook and follow us on Twitter.