There could be a master course on all things credit cards. In terms of personal financial advice, credit card articles are all over the map. There’s everything from why they should be avoided at all costs to why they should be used for 90%+ of purchases to how to play the points and rewards game. The best practices, however, can’t be whittled down to a simple one-size-fits-all approach. The best way to use (or not use) these tools, much like other personal finance decisions, is specific to the person(s) asking the question.
When You Should Avoid Using Credit Cards
- If you cannot and do not pay the balance to $0.00 every month on every card, you should stop using credit cards and not use them until the answer to this question changes. (continuing to use credit cards in this way is a sure way to deplete your wealth)
- If you find yourself spending more than you otherwise would because you have a credit card then you should stop using and not use credit cards until the answer to this question changes.
- If there’s a merchant-added transaction fee to use the credit card (and that fee is more than the value of any rewards you may receive for using the card) you should not use a credit card for that transaction.
- If there’s an annual fee associated with a credit card, and that fee is more than the value of any rewards or benefits you may receive(and take advantage of) for using the card, you should opt not to have that card.
If all of those hurdles are passed, credit cards can be a useful tool. They can aid in identity protection, building credit, tracking expenses, and fun ways for paying for life’s goals by way of built-in rewards. It’s important, though, not to focus on these rewards or rely upon credit card use if the answers to the above questions mean you’d be better off without the card in the first place!