Credit Cards are the Points/Cash Back Worth it

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I do all my spending on credit cards. I get cashback/points! These are some of the things you may hear from people in your circles. Is this right for you?


You can receive rewards from credit cards. There is no question about that. The rewards can be in the form of points, cashback, and much more. My wife and I fell into this trap ourselves. The rewards are shiny, free, and exciting. Two percent cashback that sounds great. I get money back for spending money. The truth of the fact is unless you’re extremely disciplined you will lose more than you receive.  

Interest Rate

According to NerdWallet the lowest interest rate on a credit card has an interest rate of 15.49%-25.49% Variable APR.

In the United States the average credit card debt is roughly $6000. In which most people are making the minimum required monthly payments. This would mean giving a 21% interest rate you would be paying $105 a month in interest. That’s hours of work given away so you can borrow money. 

Do we Spend More with Credit Cards? 

Prof. Drazen Prelec, who studies the psychology of money, says credit cards are insidious because they disconnect the pleasure of buying from the pain of paying. Prelec has also found that credit cards can powerfully influence people’s spending habits. “We organized a silent auction for tickets to sold-out Celtics basketball games,” he says, describing a recent experiment conducted on unsuspecting students. “We told half the bidders they could only pay with cash and we told the other half they could only pay with a credit card.”“On average, we found that the credit card buyers bid more than twice as much as the cash buyers bid,” says Prelec. 

From this study we can draw a conclusion that a majority of people will spend more if using credit

I need a Credit Card for Emergencies

I don’t know how many times I have heard this. This is false! In a case of an emergency this will only put you farther behind. What you are supposed to have is an emergency fund. You need 3 to 6 months of expense set aside in case of an emergency. This will keep you from falling into using credit cards for emergencies. 

Is a Credit Card Right for Me?

Not all people are credit card people. That’s fine. If you are not, the best thing you can do is recognize it. Some signs you may not be good with credit cards are if you carry a balance, you have paid interest on your statements. If these are things you have done don’t worry. There still is hope.

What can I do to get out of it?

So you have recognized credit cards aren’t for you. Great! Now you’re asking how do I get myself out of this hole I have dug. There are several ways to do it. I’m going to share the way I did it. It may not be the best way for you. 

First thing I did was cut up my credit card! Yep what you hear everyone say you need to do. I did. I did not close the accounts, I simply stopped using them.  Now if you’re someone that has your card saved on your wallet on your phone that needs to get removed as well. The point is to make it harder to use credit. 

The second thing is to start paying more than the monthly minimum balance. You may be saying well I have been doing that. But it doesn’t seem to help.  Yes you may have been paying more, but if you haven’t stopped using the credit card. Then you’re fighting with yourself. It’s like bailing water out of a boat. If you keep bailing water out and never fix the leak you can bail forever. So stop the leak! Stop using your credit card. 

The third thing is once you have paid a credit line off. Then take the money you were paying for that credit line and start paying off another credit line. Eventually you will have paid off all your bad credit lines. This is known as the snowball method or avalanche method. 

You have heard this from people over and over. The truth of the fact is it works. I know this because my wife and I did it ourselves. It can be done if you’re willing to sacrifice in the short term.

What if I’m Good with Credit?

Awesome it means you get to enjoy the perks that credit cards give you. Get your flights, cashback, and whatever else there may be. However, be mindful that you do not fall into the credit card traps.

Do not fret if you can’t use credit cards now. As you improve your financial situation and develop good money habits, you can revisit credit cards with financial discipline.