Why I Think Every Purchase You Make Should Be on Credit

Welcome new readers, and thanks for joining! Want to get caught up? Check out the website here. Know someone who could benefit from this email? Send it on over to 'em!

Alright, I’ll admit the past few weeks have been a bit philosophical in terms of personal finance, your career/life, theories of the meaning of life, etc. This week, I’m going try to descend us back down to Earth.

Lately, I’ve been getting some great credit card cash back. 5% back on groceries. 10% back on gas. 3% back on restaurants. It got me thinking, as I know some people who swear by debit cards, that they’re missing out. Fraud protection, cool benefits, an interest free loan (when used right), what’s not to love? I’m going to try to sell you on why you should be using a credit card for every purchase you make. And I’ll recommend my favorite at the end!

Oh - I’m also going to make the assumption you will use credit responsibly and not pay interest. The best way to use credit is like a debit card! Only spend what you can pay, and what you were already going to purchase anyways.

Do you like Free Money?

Credit cards are an interest free loan. I finally bought a personal computer on Oct 19th, but I won’t pay for it until Dec 17th due to my credit card billing cycle and how the statement closes in arrears. In a sense, the credit card company is giving me “free” money in form of an interest free loan.

A lot of cards will also give you free money in the form of cash back. They’ll return a specific % of purchases back to you. Many cards range in the 1-2% range and some may go up to 10% in specific categories. You’re likely spending money in these categories anyways already - why leave free money on the table? Let’s say you’re getting $30 in cash back a month - this could be a cool $360 a year!

How About Cool Benefits?

Purchase Protection on products, not having your bank account drained (liability protection for when someone else that’s not you makes a purchase with your card), special event access, travel rewards, the list goes on. Credit cards are neat. You can build your credit score all while enjoying neat things. That’s not without the fine print though, which could be high interest rates, random fees, etc. There’s always a gotcha with some benefits - point is, take note of these things.

Some cards have annual fees. I’m of the school of thought that the annual fee is only worth it if you meet the breakeven point, otherwise don’t bother. 5% back on travel but you don’t meet the breakeven point of $5000/year to justify an annual fee? Then don’t bother.

Need to start building some credit history? Try a secured credit card. You put down a deposit first (as collateral), then you are able to make purchases up to your deposit amount. These types of cards are popular with zero credit history people and poor credit.

Military member? You can enjoy some downright fancy credit cards for free. The American Express Platinum Card and Chase Sapphire Reserve have the annual fee waived for service members at the time of this article.

My Personal Favorite Card

Citi Double Cash Card. 2% cash back on everything. No gimmicks on categories or anything. It’s so simple and effortless. Get it and forget it. I know some cards offer 5% on rotating categories with spend limits but this just makes the most sense. I don’t travel a lot or anything so this works best for me.

Bonus - I also really like the Discover It - Cash Back card. There’s a grocery chain where I live that takes it exclusively and gives me 5% cash back. Nice. Your mileage may vary however I’m not sure what your grocery store does.

No single card is the best for everything. And no I do not participate in the cashless society conspiracy theory. Check out nerdwallet.com for card comparisons and other cards that may suit your needs. Point is, I think you should be using a credit card.

Stay Frosty my friends,

Andrew