Trent covers four important ways of dealing with your credit cards and their associates balances and interest rates. I won’t reiterate them here, first because he explains it so well and second because none of them apply to us. We have three active credit cards. Technically we have others, but they sit in the safe and are never used. We’ve simply delayed canceling them because of the potential impact on our credit. When my husband and I first met, he had just recovered from significant credit card debt that had helped to wreck his credit rating. As he paid off each credit card he cut it up. He swore he would never get another credit card. I had never had a credit card, and thus had no credit at all to speak of. But we recognized that if we wished to own a home someday, barring the ability to pay cash which we knew was unlikely for us, we would need to build our credit. So I applied for one card and my husband applied for another. We chose a card that would earn cash back bonuses. One card was for groceries and the other for fuel. Then I opted to apply for a Kohls store credit card. This gave me access to regular coupons and sales and actually saved us a great deal of money in the long run since I shop for clothing there most of the time and now we buy things for my husband and daughter there as well. At the end of the month, all we had to do was look at the credit card bill to see if we were on budget and them pay off the bill entirely. We have never carried a balance and none of our cards have yearly fees.
I know that many personal finance gurus will tell you to avoid credit cards like the plague. This is good advice if you cannot control your spending. I have actually found cash to be more of a temptation. I don’t make small useless purchases with my credit card because it seems silly to bother, but I’ll spend loose cash I have floating around in my purse. We have expanded toward using our credit cards for other things, such as large purchases and medical bills. We still have three cards, but the original credit card my husband applied for has been replaced with a card that funnels money into my daughter 529 college savings plan. We now have great credit, thanks to responsible use of these cards. I believe that credit cards used responsibly have an important role to play in your personal financial plan. You just have to know your limits and resist temptation. In our case, it’s nice to get those rebate checks throughout the year we’ve earned through our credit card purchases. That money gets socked way to help make extra payments on our student loan debt.