My Credit Card Purchases

Posted by Mike Smith :: July 27, 2007 @ 8:02 am

Regular readers of the Lending Club blog know how often the problems with credit cards are discussed here. Credit Card debt, interest and fees, and similar topics have been covered extensively by me, as well as other contributors to this blog. You will probably be surprised to learn then that I use my own credit card quite regularly. As you see how I use it in a responsible manner, my hope is that you will try to emulate these methods in place of worse ones.

My main philosophy towards credit cards is that they are an instrument of convenience rather than an instrument of debt. That means that I never use my credit card to purchase something that I don’t have the money to cover. I basically use my card instead of writing a check for my purchases. I also try to pay all of my bills with my credit card in a similar manner.

Advantages

• I have never had to pay interest or fees because I pay my credit card bill on time and in full. If I couldn’t pay my bill in full, then I must have made purchases beyond my means, which is against my self-imposed rules.
• I only have to write one check a month. Since my credit card is issued by my bank, I actually don’t have to write a check at all, but rather perform an online transfer from my checking account to my credit card account.
• All of my transactions can be downloaded into my financial tracking software from a single location. This helps me to easily compare my budget versus actual expenses on a regular basis.
• The main advantage of this system, for me personally, is that my credit card gives me rewards points for every dollar I spend. By making purchases on my card I get something (points) for nothing (since I would have made those purchases anyway).

The main reason that I am able to use my card in this way is that I am not heavily in debt. If I were burdened with excessive debt, then my first step would be to get out from under that debt. Luckily for our readers, strategies for debt reduction are often provided here on the Lending Club blog.

My method of credit card use is fine for normal monthly expenses, but begs the question of how to handle larger purchases, particularly if they are unexpected. First, you should remember that by not having to pay for interest and fees on a regular basis, my saving are able to grow more quickly. That means that I’m more able to afford larger purchases when the need arises. Second, if financing is required, I know that a P2P loan from Lending Club is a significantly better way to borrow. With much lower interest rates than my credit card would charge, any debt taken on would be much more manageable.