Money Goals for 2022 Day 5: Smart Use of Plastic
“All things are lawful for me,” but not all things are helpful. “All things are lawful for me,” but I will not be dominated by anything. (1 Corinthians 6:12, ESV)
He who loves money will not be satisfied with money, nor he who loves wealth with his income; this also is vanity. When goods increase, they increase who eat them, and what advantage has their owner but to see them with his eyes? (Ecclesiastes 5:10-11, ESV)
Know well the condition of your flocks, and give attention to your herds, for riches do not last forever; and does a crown endure to all generations? (Proverbs 27:23-24, ESV)
When I was in high school, I was in a club called DECA. We had a competition in Greensboro, NC, at a hotel/convention center and had to survive off food from the mall across the street for the entire weekend. At first, it was exciting to go to the mall with my friends and walk around, eat Subway, and go back and play video games in the hotel room between sessions. However, after 7 straight meals in a mall food court, I wasn’t feeling so great anymore. Chinese food, Subway, pizza, Chick-fil-A—so much junk food in so few days. What once felt like a lot of fun turned into feeling sick and wanting to be home. Too much of a good thing turned into a bad thing.
You may be wondering what a story about a 17-year-old surviving off mall food court food has to do with your finances, and the answer is… not a whole lot. The point I do want to make, however, is that too much of a good thing can easily turn into something very bad. In thinking of credit cards, they can be a great asset if used the right way. I know there are some (Dave Ramsey) who would say to never use a credit card, but I believe the proper use of credit cards can have some great benefits.
What exactly is a credit card? Think of it like this: every time you swipe your credit card at the store, you are taking out a small (or large) loan with the institution backing the card with the promise that it will be repaid. If repaid within the window (normally 3 weeks or so), there is no interest on the loan. However, if you wait to repay until after the grace period has expired, the interest rates can be pretty severe, sometimes even in the 25-30% range. Yes, you may have earned 3% back on the purchase, but that is quickly eliminated at 24.99% APR.
So, how can it be responsible to basically take out a mini loan every time you buy something? Well, for starters, don’t spend more than you can afford to repay! Carrying a balance on your credit card is a quick way to put yourself behind the eight ball when it comes to your finances. I know it can be too easy to swipe that card at the store (I have done it many times myself!) on something you don’t need, but try to keep your level of spending the same as it would be if you were paying with a debit card or cash. If you are able to do this and pay the balance every month without digging into savings, you’ll be well on your way to building up a good credit score and taking advantage of some great credit card benefits.
Depending on which card(s) you choose, you may get a certain percentage back on your purchase, a certain percent off the purchase price, flight miles, points that can be redeemed for rewards, among many other perks. If credit cards are used correctly, you can get paid by your credit card company to spend money you’d already be spending. Built-up cash back can be used to offset spending, miles can be redeemed for cheap flights, and points can be used for all kinds of benefits. As long as you don’t carry a balance, use those credit card benefits to your advantage.
Paul wrote that all things were lawful to him, but not all things were profitable. Credit cards are available and can be useful, but if you are the type of person who can’t handle having access to the level of spending a credit card affords, it may be wise to avoid them altogether. This is a choice each person will have to make. Be honest with yourself when making this assessment and do what’s best for your financial future. Remember, we are all stewards of what the Lord has graciously given us.