Minimalism – Using Credit Cards
One of the things I am asked often is should people who are minimalists use credit cards. I think we can expand that to ask if anyone should use credit cards?
It truly is a personal decision, but there are certainly pros and cons to using them. I think using a debit card is absolutely okay It is safe and has insurance on it like a credit card. And with it, like cash, you must have the money in your account to pay for the item. I have debit cards with two credit unions here locally, and both pay Kasasa rewards. One of them pays 4% on your first $250 of expenses monthly as long as you use the Debit Card at least 12 times for a total of $250. So each month I receive $10 as a reward.
The other credit union pays 3% on up to $400, but the rules are slightly different. Each debit transaction must be $10 or more, and there must be a total of 10 transactions for $400 or more. So each month I receive $12 in both my personal and business accounts as I use two different debit cards and follow the rules.
So monthly I receive a total from both credit unions $34 of interest by spending a little over $1000. Now if you did not have those expenses to begin with, it would be stupid to spend money to receive the interest. You could just save $34 and spend nothing. However, these are expenses we have for buying groceries, household items, fuel, and gardening expenses.
Before going any further on the use of credit cards, I want to take this opportunity to give a positive thumbs up on Dave Ramsey’s book, Total Money Makeover.
Total Money Makeover By Dave Ramsey
3 years ago, my wife and I took a course on getting out of debt at one of our Credit Unions, and then followed his 7 Baby Steps to Debt Freedom. We were free of credit card debt in about 14 months. His plan works for everyone, and I needed his cold turkey approach to get debt free. If you have issues controlling debt, I recommend you follow his simple easy-to-follow steps.
The first two steps are super simple. Put $1000 in an easy to get to Emergency Fund (like a Savings or High Yield Checking Account). Then you use the debt snowball to pay off all your non-mortgage debt such as credit cards, car loans, student loans, etc.
Dave Ramsey is a proponent of never using credit cards. And I have no issue if you wish to use his method. His method is safe. You eventually over time put six months of salary into your emergency fund and never use anything but cash to pay for your items. He has no issue using Debit Cards.
If you can say yes to these next questions, it could be that you can live easily without using credit cards.
If you can say YES to all three of those questions, I would just rock on without any credit card use. Why borrow and take a chance on developing a bad habit? Because I misused credit in my younger years, my wife and I have a rule. If we ever fail to pay off every credit card in full each month, then we stop using them. If you pay them off monthly, you pay Zero interest for the whole year.
If you are not in the heavenly mode listed with three yes answers, you probably are like 90% of Americans. It Is crucial to not try and do my credit card recommendations until you get rid of all non-mortgage debt. Read Dave Ramsey’s book and follow his rules. I tried for 7 years to get debt free and failed. Once I went to his plan, we were out in 14 months and have since paid off our home mortgage. It is the best feeling ever to know you own your own home.
So if you are debt free or in a good position to pay off any credit card debt each month, I am going to give you a few cards with the pros/cons of each one. I have used all of these and most are still open today.
Citibank Custom Cash Rewards
SAMS CLUB PLUS MEMBER
AMAZON STORE CARD
PENFED CREDIT UNION PLATINUM REWARDS
I have not researched the new WALMART Plus card, but I understand that it may pay up to 10% cash back on fuel. Again, to get it requires a yearly charge of like $85. It does include free grocery delivery I believe.
I hope this gives you an idea of what is available in the Credit Card market. I will close with a reminder from Dave Ramsey who said “I have never met a millionaire who got rich off Discover or Visa cashback points.”
Good thought to consider. I pay these cards off every month and only use them to purchase what are our basic needs for the month. Don’t ever carry credit card balances with high-interest rates. If you are having trouble with credit, ignore all the credit card recommendations and read Dave Ramsey’s book listed above. You can check it out for free at most libraries.
Total Money Makeover By Dave Ramsey
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