In the past, before I woke up and realized I had to begin saving money, I would quickly whip out a credit card on a whim. Mostly, these whim’s had something to do with big, brown eyes pleading for some large item that we really couldn’t afford. And I couldn’t say no. I’d use the card for electronic purchases, a nice watch, clothes, a hot dog stand, pretty much any item, large or small, that I couldn’t, at that moment, afford. Basically, the money wasn’t in the bank. I’d use the card thinking, “Oh, I’ll be able to pay it off when my next pay check comes.” The next pay check would come, I’d pay rent and all the basic necessities, then realize I could only make the minimum on the credit card purchase. And so it goes, this becomes a cycle that many can’t escape.
Luckily, my husband and I have been able to pay off the credit cards in full, and now I’m not as likely to whip out a credit card. Actually, I’ve gone back to the way I felt when I first received them, terrified. I cringe at the thought of using one, but I know that in order to boost my credit score, I have to ‘keep them active’ and use them sparingly. Yet, here is the dilemma, I don’t own any credit card that is linked to a rewards program. Meaning, I don’t earn cash back or points that could be applied to travel or gift cards. These rewards programs come in handy, I know because my debit card is enrolled in one. Each time I use my debit card as a credit card, I earn points that I’ve been using toward Shell Gas cards. I’ve only paid for gas a few times this year, saving about $600.
Of course, I could apply for a credit card that earns rewards, but right now I am avoiding any credit inquiries on my credit report. Since these are ‘hard inquiries’ they may negatively affect my score. How I choose which is best for me:
USE THE DEBIT CARD FOR
- every day purchases: the money is in the bank and I earn rewards points
- no repayment required: since I use my debit card only when I know there is money in the bank, there is nothing to repay or accrue finance charges
- basic money management: again, using my debit card forces me to ‘live within my means’
USE THE CREDIT CARD FOR
- small purchases: these purchases keep my cards active and I know I can pay them back quickly
- travel: unfortunately, many hotels and rental car companies require a credit card on file to ‘hold’ the room or rent the car
I read a lot of personal finance blogs for ideas and tips, and many say they manage their everyday expenses using their credit cards and earn rewards or cash back. For some, this totally works, but for me, it’s best I stick with my debit card.
