Thursday, October 2, 2008

Will that be cash or credit?

Columbia and I have been long time proponents of using credit cards. I know this is not a popular stance in the frugal folk society, but here are some reasons why it has been a positive experience for us:

- We NEVER carry over a balance. Ever. The bill gets paid in full every month.
- We have no debt. We also have no equity. As we don't own anything, showing responsible credit card use is helpful in getting a home loan. This will be handy someday in the future. Someday...
- Cash burns a hole in my pocket. If I have it I tend to want to spend it because there's no trace of my sins. The credit card has a statement that will reveal my $4.32 Starbucks purchase. I'm much less likely to splurge if the evidence is going to be around.
- As the credit card has a statement, by using it for all of our purchases we can see exactly where our money went each month. This can be done with cash by using receipts. Collecting all of the receipts has been a problem in the past and saving them all leads to clutter.
- We get money back. It's only 1% but it's something. Occasionally there are special deals we unknowingly hit and it is a bit more. We have an amazon card and we get reward credit towards As this is our online store of choice (not that we purchase often), we use the credit to buy gifts for family or items we might need. Buying a baby gate for Pumpkin gets much easier when you're not laying out the moolah for it.

Credit is not the method for everyone. It may not even be the method for us soon. As we evaluate our life on one income we may have a much harder time having our income be greater than our spending. If this is the case then we might have to go to the highly regarded envelope system. Simple Mom posted a great explanation on how she has made it work for her. As much as I hate the idea of resorting to that (it does seem like a lot of work), if it makes living on one income possible then we may switch. Until then, Charge It!

Posted picture used under creative commons license from Flikr user paalia.

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