Credit Cards are the best way to pay for all of your purchases
Credit cards seem to be the enemy of the financial press. Article after article points out how people can be financially devastated by the high interest rates on credit cards. They talk about the amount of purchases people make on their credit cards and point to it as proof that people are under extreme economic distress and doomed to a life of perpetual poverty. Dave Ramsey, probably the most well-known personal financial guru, has pretty much created a multimillion dollar a year business centered around the idea that credit cards are evil.
They are wrong. The fact of the matter is that credit cards are the best way to pay for all of your purchases. They are the most convenient way to pay, they are the cheapest way to pay, and they are the safest way to pay. It is true that if you don’t handle them well you can ruin yourself financially, but it is also true that you could possibly hurt yourself with a knife. Do you have knives in your kitchen? Do you cook with them? If you are capable of treating knives with the kind of care it takes to use them as a tool without injuring yourself then you are fully capable of using credit cards without hurting yourself also. To help you from hurting yourself with credit cards I have developed a revolutionary new strategy for not paying huge amounts of credit card fees.
artofbeingcheap.com’s revolutionary new strategy for not paying huge amounts of credit card fees
Step one: Pick a credit card with no annual fee.
Step two: Never charge so much on your credit card that you will have trouble paying your bill in full.
Step three: Pay your credit card bill in full on time every month.
That’s it. If you follow those three rules your pretty much set. No annual fees, no interest, no late payment fees, no fees of any kind.
Now that we have settled once and for all that credit cards don’t have to be financially dangerous, lets talk about all the reasons they are so great.
Credit cards are the most convenient way to pay
Credit cards are super easy. All you have to do is carry a credit card around, and pay with it. That’s it. Also, I can pay with a credit card in stores, right at gas pumps, or online. Basically anywhere.
If you are paying with cash you have to plan for how much you might spend and make sure you have that much on you all the time. If you are low on cash you have to take the time to run to the bank or ATM and get some more. Most websites don’t accept cash.
If you are paying with checks you will spend a lot more time standing around cash registers writing out checks and carefully recording each transaction in your register while everybody in line silently curses you for wasting their time when you could have just paid with a credit card and been out of the store by now. That’s embarrassing, you don’t want that.
You obviously can’t write a check on a website, but some allow you to enter your checking account information so that your account can be auto debited. I don’t personally recommend giving your checking account information out online.
Debit cards are almost as convenient as credit cards. The only difference is you have to make sure you have enough money in the right checking account but that really shouldn’t be too complicated.
Credit cards are the cheapest way to pay
I already discussed above that credit cards are free, but that’s not quite true. Actually, a good credit card will pay you cash back on the purchases you make which means that credit cards are better than free.
If you are paying with cash you have ATM fees to worry about. There are a few checking accounts out there that don’t have ATM fees but you will pay more for cash even if you have one of those accounts. The time and gas it takes to get to an ATM aren’t free.
If you are paying with checks you will have to buy those checks. You will also have to worry about overdraft charges if you don’t manage your account well.
Once again, debit cards are the second best option here. Assuming you can manage your checking account well enough to avoid an overdraft a debit card should be free. However, most debit cards don’t give you rewards like credit cards do. There are a few that do give you rewards, but those rewards are always inferior to what you could get with a credit card.
Credit cards are the safest way to pay
Finally, credit cards are the safest way to pay for a number of reasons:
If you buy something and it turns out the merchant cheated you, you get your money back. All you have to do is make a phone call or two and maybe sign a form. A few years ago, I bought a couple of cheap Chinese android tablets from a Chinese website (briefly mentioned here) that broke within 90 days of purchase. The website I bought them from told me to mail them back, which I did. I never heard from the website again. They never refunded my money and never sent me back repaired tablets. Luckily, I paid by credit card, so my credit card company refunded my money in full.
According to visa.com, you may not get this same protections with a debit card.
If you pay with cash or a check, getting your money back will obviously be much more difficult.
If you lose your wallet you don’t need to worry too much about the credit cards that were in there. Just call up your credit card company and tell them your card was lost. They will cancel it immediately and send you a new card. If your card is used by criminals you don’t have to worry about that either. Just tell your credit card company about it and they will reverse the charges.
Debit cards don’t work quite as well when it comes to theft. While your bank will refund either all of your money, or all of your money less $50 depending on your bank. But, they legally have 10 business days to get your money refunded while they investigate. During those 10 days your money could be gone and that could cause overdrafts from all the other things you have to pay for.
If your checks are stolen your bank will return any checks that you didn’t properly authorize, but it doesn’t necessarily end there. You will then need to close your account and open a new one which means taking a tremendous amount of time out of your schedule to contact every company that has auto payments out of your account to register your new account number with them.
It doesn’t stop there though. The company that received the bad check back may decide to turn the check over to a collection agency which will create more headaches for you.
When cash is lost or stolen it is gone for good, obviously.
Other reasons credit cards are great
Having a credit card is usually good for your credit score. Credit card companies will report to the credit card bureaus that you pay your bill on time each month which over time will cause your credit score to go up. This is something that no other form of payment can offer. While it is true that having too much debt can make getting a loan difficult, paying off your credit card each month should mean your balance never gets too high.
There are other reasons why credit cards are better than every other form of payment, but many of them depend on your credit card company. Some credit cards offer benefits such as automatic insurance coverage on rental cars, automatic life or disability insurance under certain circumstances, or free extended warranties on the items you purchase with your credit card.