Should I Really Be Using A Credit Card To Pay For Everything?

Credit card companies are constantly touting the benefits of their rewards programs, promising free flights, airport lounge access, exclusive restaurant reservations, and more for customers who choose to spend with them. It all sounds incredibly tempting — but what’s the catch? Surely, there has to be one, right?

If you’re new to the world of credit cards and not sure exactly how they work, it helps to be fully aware of what you’re getting into. There are so many ways for regular people with regular income sources to take advantage of the perks, but just as easily, credit card companies can make money off of you if you’re not careful. In some cases, it makes more sense to stick to debit to avoid the hassle. Before you sign the dotted line and hand over that annual fee, make sure you’re prepared with a plan for how you’ll use your card responsibly.

Don’t spend more than you can pay off each month.

“Credit cards are a tool in the same way that hammers are a tool, and they're very effective when you need to nail something to the wall and are very damaging when your hand is in the way,” says Katie Gatti Tassin, founder of personal finance platform Money with Katie and author of Rich Girl Nation. Credit cards only work in your favor if you are paying off the full amount you accrued each month. Full stop. That way you aren’t losing any money on your purchases — you’re only using the purchases you’d be making anyway to gain points towards future redeemable freebies like airline tickets.

Another perk of credit cards, if you use them carefully? More financial security. Tassin recalls getting her debit card information stolen in 2018, leading to an “arduous and scary” process of getting the money back in her account. Credit cards provide an extra layer of protection. “If somebody gets your credit card number and runs up a bunch of charges, you just tell the company ‘this wasn't me,’ and they take it off,” she says.

Make rules for yourself about what you’ll put on the card.

If you know you have a problem with overspending, you should really consider carefully whether you’re ready to move from debit to credit. “If you are someone that has challenges with impulse control with spending, credit cards are more like using the hammer on your own hand than to nail something to the wall,” Tassin says.

To avoid getting into unnecessary debt, try making rules about what you’ll put on your credit card. Maybe limit it to necessities like groceries and utility bills, and keep all your clothing purchases on debit so you can’t splurge beyond your means. Setting limitations upfront can make it easier to avoid the temptation of that late-night online shopping spree that spikes your anxiety the next morning.

Keep a safety net of savings if possible.

If you’ve decided that you can stay in control of your credit card spending, it can be helpful to understand the amount of cash flow you need before you start. In general, if you’re planning to put every purchase on a credit card, Tassin recommends having around three months’ worth of expenses as a backup in your bank account. “That could be in a savings account, high yield savings account, etc — but have access to at least that much money,” she says. That way you can guarantee that you’ll pay down the entirety of the credit card each month and avoid interest fees or getting into a debt hole.

Some additional food for thought: If you’re carrying high-interest debt like student loans, Tassin says it might be best to focus on paying those down first. “Generally speaking, you want to avoid using a line of credit if you have other high-interest debt,” she says. As much as possible, eliminate the extra money you’re spending on those before adding more spending on a credit card. This will help streamline your expenses and keep your debt from getting overwhelming or out of your control.