Are Credit Cards Good Or Bad? Here’s The Truth

Are credit cards good or bad? Some people believe that using credit cards is a bad financial decision. And, it may surprise you that I believe there is some truth to this, even as a credit card points and miles traveler. Here’s the truth about whether credit cards are good or bad.

By the way, I am not a financial advisor, so definitely consult with your financial advisor who knows your personal circumstances before making major financial decisions. Although, I do feel unbiased enough to speak on this subject based on my past personal experiences with debt, credit cards, and traveling points and miles.

Are Credit Cards Good Or Bad?

Here’s the truth: credit cards are neither good nor bad inherently. That little piece of plastic in your wallet holds no intrinsic moral value or power. But, we as cardholders hold moral value and power. Therefore, we as cardholders are good or bad. The cards aren’t what are a good or bad financial decision. We are what make the cards a good or bad financial decision.

Credit cards are merely a tool that can be used for good or for bad. Think of a sword in battle. The sword is a tool, a really powerful one. If the sword is used to fight evil, the sword is arguably good. If the sword is used for evil, the sword is bad — really bad. But, without a fighter carrying the sword, a sword is neither inherently good nor bad.

Maybe this comparison is a bit extreme, but you get the picture. Perhaps a better example is money. Money is also a tool. A little piece of green paper with a late president’s face on it holds no moral power inherently. But, when we use money for good through generosity, providing for our families and donating to charities, money is good. When we use money as a poor excuse to be greedy and selfish, money is bad.

Like money, credit cards are a tool. Credit cardholders have the power and morality to make credit card utilization good or bad. When credit cards are used responsibly, they can provide fantastic benefits like cash back, points and miles, free airport lounge access or even free business class flights. When credit cards are used badly, they can be really, really bad. So, let’s talk about the different uses, good and bad, and whether or not you should have a credit card.

When Credit Cards Are Bad

Credit cards are bad when used as a way to live above your means. If you are using credit card debt as a way to increase your lifestyle with cash that you do not have to spare in your checking account, you are using credit cards badly. Honestly, this is just greed in disguise. Keeping up with the Joneses is greed and envy in disguise.

Of course, there are unfortunate circumstances when families in deep poverty need to use credit cards to buy basic necessities like diapers or baby food. We’re not talking about or judging those rare circumstances of survival. If you’re reading this sentence on your $1200 smartphone, you probably don’t qualify for this moral exception anyway if you’re being honest with yourself. (Tough love, I know.)

Consumer debt is a real problem, especially with new credit card credit lines being so easily accessible. Not only do you not actually own anything you go into debt for (FYI, until you pay it off, the bank owns it), but when you’re accruing debt for things that aren’t necessary, you’re paying more for those things in interest than what they’re actually worth — a lot more. Like Proverbs 22:7 says and the financial legend Dave Ramsey often quotes, “…The borrower is the slave of the lender.”

Is Dave Ramsey Right About Credit Cards?

So, is Dave Ramsey right about credit cards? If you aren’t familiar with Dave Ramsey, he is an industry leader in the finance world, helping millions of people become debt free and stay debt free, myself included. My husband and I snowballed my graduate school student loans down to zero with the principles taught in Dave Ramsey’s Financial Peace University online course. We’ve been debt free since. Ramsey is very publicly anti-debt and, therefore, anti-credit card. He’s essentially the face behind the saying, “cut up the credit cards.” Surely, you’ve heard this phrase before even if you haven’t heard of the Ramsey brand.

However, if you’ve seen any of my other content, you know that I am now also an avid credit card user. In fact, I haven’t touched my debit card in years. I rarely carry cash. Instead, I responsibly leverage credit cards to earn points and miles for basically free travel, all while still maintaining a debt free life.

I give a lot of merit to Dave Ramsey’s teaching on credit cards. My husband and I actually still follow his personal budget breakdown almost to a T. But, what people don’t consider is that Dave Ramsey is speaking to a very specific target demographic when he preaches against credit cards. Dave Ramsey’s target demographic (meaning, the demographic of people he is trying to help) is primarily built of people who are in debt, irresponsible with money, bad at maintaining a personal budget, have no education in personal finance, and/or prone to spending above their means (whether that’s through credit cards, student loans, car loans, etc.). For these people, credit cards are indeed really bad.

What about the rest of us, those of us who are naturally savers, strategic with our personal budgets, organized and committed to spending within our means? Are credit cards good or bad for us?

When Credit Cards Are Good

Credit cards are good when the cardholders pay off the cards in full on time every month and are leveraging all of the card benefits. When used responsibly, credit cards can be an easy way to earn cash back on every day purchases, earn points and miles redeemable for basically free travel, and get access to additional luxurious benefits such as travel insurance, TSA Pre-Check or Global Entry, airport lounge access, hundreds of dollars of travel credits, and so much more.

Although, like I said, the cards need to be used responsibly. To fully benefit from card usage, especially travel cards, you need to make sure you follow all of the essential points and miles rules. You can download my points and miles rules checklist for free here, which lists all of the exact rules you need to follow.

In this case, travel credit cards are good, really good. Following these rules has enabled me to travel places I never thought possible for pennies on the dime — places like the Maldives, Bora Bora, Italy, Japan, Hawaii, Iceland, the US national parks and more — all while staying stay debt free and living within my means. I’ve gotten tons of free flights, free rental cars, free hotel stays and free food on trips thanks to travel cards.

Are Credit Cards Good Or Bad For You? Here’s How To Know

So, how do you know if credit cards are good or bad for you? Here are a few questions to ask yourself to decide.

1. Are you debt free (other than a mortgage only)?
2. Are you a money saver?
3. Do you have a personal budget in place?
4. Do you stick to your budget consistently every month?
5. Would you consider yourself to be Type A and organized?
6. Do you have a healthy savings and/or emergency fund?
7. If you currently use a credit card, do you pay it off in full on time every single month?
8. Do you have spare spending money in cash to spend on travel credit card annual fees?

If you answered yes to all of these questions, travel cards could be a great way for you to make your bucket-list dream trips a reality while still living within your means. You can get started with my Budget Travel Bible ebook, which has an in-depth chapter on using travel card points and miles for beginners. If you answered no to any of these questions, you should reconsider opening any cards until you can answer yes.

More Travel Credit Card Tips

What Are Travel Credit Cards?
How To Get Free Flights For Life (Travel Hacking For Beginners)
How To Get More Credit Card Points Without Spending More

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