Credit Cards - Why They Work For Me

A lot of frugal websites are families who are already debt-free, who live on less and I would guess the majority are those who don't use credit cards at all as part of their personal financial plans. Most financial planners and advisors do not advocate the use of credit cards at all.

I have a confession to make: I have credit cards. AND I use my credit cards as part of my financial plans and as part of my budget.

Here's what I do and why:

1) I only use cards that give me something back. For most everyday expenses, I use 2 cards: an Alaska Air Visa and Discover.

What do I get? 1 mile for every dollar spent on the Alaska card and additional miles when purchasing tickets on Alaska Air. They often have promo periods where you earn 2 miles for every dollar on Alaska tickets. We have earned a TON of miles this way.

My kids' daycare accepts no credit cards other than Discover, so I earn money back for all I spend on that huge expense. Discover offers a paltry 1% cash back in general. However, four times per year they run promotional periods where you can earn 5% cash back as a bonus in different spending categories. For example, October 1 through December 31 I earn 5% at all grocery stores, restaurants, movie theaters and movie rentals. Although I've been cutting my grocery bills dramatically thanks to couponing and wise shopping, I'm also earning when I spend.

2) Pay balances in full every month. This has not always been the case but I save all my receipts and I diligently keep track of billing periods to make sure that I have enough to cover the whole month's expenses.

3) Use a card that gives you get an extra discount. Macy's is one example of this, they always seem to have an extra 15% or 20% off "when you use your Macy's card." Often this even applies to clearance merchandise. Since I already have the cash saved for these purchases, I pay the balance in full when the bill comes. This extra discount can really make the difference. We used these special discount days to buy furniture quite a few years ago, turning a large expense into a lesser one just by using the card.

Do I sometimes forget about purchases? Yes. Unfortunately, I am not one of those write everything down people - I wish I was! But I also confess that I pad my budget a bit for over the amount that I will actually need. That way I still have enough to pay off the balance in full every month.

Other frugalistas may disagree with these reasons but it works for me and I am earning either cash back (albeit not at an extraordinary rate, but something nonetheless) or mileage, which helps us vacation more frugally.

So even though I am working toward a Debt Free 2009, I will continue to use my credit cards as long as they continue to help me save. What about you? Take my poll above or leave me a comment with your thoughts on the credit card debate.