If any of you have heard anything about Dave Ramsey, you probably know that the guy hates debt. Like really hates debt. He tells people not to borrow for anything, including a car, and education! But the biggest thing he tells people is to get rid of credit cards. No matter what the card perks, he says to get rid of it.
Now I view this a little differently… Rather than telling people flat out that they shouldn’t have a credit card, everyone should learn how to responsibly use a credit card.
Building your credit
First off, credit cards will help you build your credit score. Dave Ramsey says that you don’t need a credit score for anything if you pay cash for everything. In all reality, that’s not quite possible. Yes, save up and pay cash for your car and things like that, but do you want to be a home owner some day? You will probably be taking out a mortgage. Dave would rather you pay cash for your house, but sorry, Dave! Houses in Portland are a little more expensive than Tennessee…
Credit scores are also looked into by landlords when you are trying to rent. Having a greater credit score would show that you’re a responsible person, and this can even give you a lower deposit.
Responsibly using your credit card
This is the part that causes people to go into credit card debt. It’s easy to find a card with fun perks, but it might be harder to have the right mindset about credit cards. The biggest credit card advice I can give is this:
If you don’t have the money in the bank, don’t spend it on a credit card.
I hope this is common knowledge, but a credit card is not free money. You will have to pay it back! And if you don’t pay it back every month, then you will start accruing interest (a lot of interest). Don’t fall into the hole of credit card debt. Make your budget every month so that your income equals all your expenses, and use your card on some of your expenses. If you didn’t budget for a Nordstom trip this month, don’t go to Nordstrom on your credit card.
Use your credit card on ordinary and routine purchases like gas and groceries. This will make it super easy to pay off each month because these are monthly expected and budgeted items! Treat your credit card just like a debit card, and if you don’t feel that you are able to do so, get rid of the credit card. It is better to not have a credit card than get yourself into credit card debt.
Paying your card
At the end of the month, you want to be sure to pay off your entire credit card balance so you can avoid accruing interest. Using a credit card the same as debit card will require some serious budgeting and self control. At the end of the month, it may look like you have an extra $400, for example, in your checking account, but this is the amount that you have temporarily “borrowed” on your credit card, and it needs to go to paying off your credit card balance.
Credit cards can be great for building your credit, and some card perks are beneficial as well! Just remember how important it is to responsibly treat, use, and pay off credit cards. Do NOT get yourself into credit card debt. It’s so easy to avoid if you budget correctly at the beginning of the month and pay off your entire balance.