Credit cards are a little like playing with fire. Some say you should not use them at all. Therefore before I explain which cards I use and why I wanted to give some extreme cautions.
Most people use credit cards. Most people should not be using credit cards. If used incorrectly, they can be extremely hazardous to one's overall financial well being.
Albert Einstein famously said, "Compound interest is the eighth wonder of the world, he who understands it, earns it... he who doesn't... pays it." Many credit cards have interest rates above 20%. When you have 20% working against you, that is hard to climb out of. Therefore my general rule on credit cards is you should avoid them unless:
You have an emergency fund (3-6 months worth of lifestyle and debt expenses saved up) and-
You have not had to carry a credit card balance for any month in the last three months.
Knowing your limits is very very important. If you cannot satisfy the above conditions, then stop reading this and lay your cards aside. They are not designed to be your emergency fund or to give you margin.
While this isn't a universal recommendation, I personally don't use them for credit score purposes. See why I think credit scores get too much attention. The primary reason is cash back.
People have gone to the n'th degree maximizing credit card rewards. I have not opted to spend time on that. Therefore I chose cards that gave really good simple cash back on goods we commonly purchase. Some limits may apply to the below cash back listed. Terms may apply and please review their corresponding websites fully. Also the card terms may change.
American Express Blue Cash Preferred whenever we purchase groceries (6% back) and gas (3% back). There is an annual fee.
Amazon Prime card whenever we purchase goods on Amazon (5% back).
Citi Double Cash for everything else (2% back).
The above is not maximizing credit card rewards but I have found it to be relatively simple and gives us cash back on purchases we are making.
Comments