Personal Finance

My wife and I use credit cards over debit for travel points — is this the best strategy?

Christy Bieber

Published: December 18, 2024 11:45 am

Flywheel Publishing has partnered with CardRatings for our coverage of credit card products. Flywheel Publishing and CardRatings may receive a commission from card issuers.

Key Points from 24/7 Wall St.:

• A Reddit user is questioning whether he should give up using credit cards all the time.
• He feels constant card use made accomplishing financial goals harder, despite paying his bills in full.
• The benefits of cards are too good to pass up when there are other ways to accomplish financial goals.
• The right cash back credit card can earn you hundreds, or thousands of dollars a year for free. Click here now to see our top picks. (Sponsor)

Recently, a Reddit user posted an important question. He said he always pays with credit cards to earn rewards and, although he pays them off before paying interest, he’s concerned exclusive card use makes it harder to save and avoid impulse purchases as you aren’t seeing the money leave your account. He also referenced studies showing “free money” from cards is a “mirage” because you so often end up overspending.

His question is whether he should stop using cards and switch to using cash and debit cards only. Is that the right move?

Does using credit cards help or hurt your finances?

As the Redditor pointed out, the question of whether to use cards or not is one of the biggest debates in the personal finance world. And, there’s a good reason for that. Credit cards can either be an amazing tool or they can lead to financial destruction.

The right answer depends a lot on your personality. If you can’t trust yourself to be responsible and pay off your cards in full before paying interest, you should not use them. The chance that you’ll end up in debt and paying upwards of 20% interest is too great.

However, if you can be responsible, you should absolutely take advantage of all that cards offer you. Let’s say you get 2% back in travel rewards and spend $10,000 a year on your credit cards. Card use can effectively give you $200 of your money back. That’s a lot of money to pass up.

Depending on the card, you can also get the strongest possible fraud protection, take advantage of cardholder perks like extended warranties and return protection, and get travel-related benefits like rental car insurance.

Cards can also make a big impact on your credit score, enabling you to establish a positive payment history and show you can repay debt responsibly. If you’re able to build credit with cards, you can get cheaper mortgages and car loans, which can save you tens of thousands of dollars over your lifetime.

Since this Reddit user has proved he can pay off his cards in full and avoid interest, taking advantage of these benefits is a no-brainer. Giving up all these benefits makes sense only if you have so much difficulty controlling your spending that you can’t afford the risk. That’s not the case here.

What about the downsides?

So, what about the downsides the Redditor pointed out? There is some evidence that people spend more with cards. If that’s the case for this poster and he’s making impulse buys that interfere with savings, that’s a problem. However, these issues are not a reason to give up the upsides when there are other ways to overcome them.

The easiest and best option is to make a budget, decide how much to save and spend, and then automate that process. If the Redditor thinks he isn’t saving enough, he can decide what enough is, work his budget around that amount, and transfer the money automatically on payday. Then he can spend what’s left over guilt-free — charging it on his card and continuing his practice of paying off the bills.

Making a budget should help with the impulse purchase problem too, but there are additional techniques to do that as well including:

• Imposing a 24-hour rule before making purchases over a certain dollar amount.
• Recording every purchase on a spreadsheet to hold yourself accountable (and force yourself to think about whether you really want to buy).
• Removing your stored credit cards from online sites so you must stop and manually enter the card number each time you buy.
• Putting a picture in your wallet of your dream goal — like a new house or early retirement — that you’ll see each time you reach for your card to make you think twice about an impulse buy.

These approaches to saving more and curbing impulse spending won’t require giving up rewards and perks like swearing off cards would. It’s far better to put them in place and keep charging everything and getting all the advantages credit cards have to offer.

Flywheel Publishing has partnered with CardRatings for our coverage of credit card products. Flywheel Publishing and CardRatings may receive a commission from card issuers.