The And
Welcome back to the And.
There is a debate that runs endlessly in personal finance circles, and I've decided it's time I weighed in.
On one side you have people like Tori Dunlap, smart, credible, and firmly in the camp that credit cards, used well, are one of the best financial tools available. The points. The cashback. The consumer protections. The credit-building. Use them strategically, pay them off in full every month, and you're essentially getting paid to spend money you were going to spend anyway.
On the other side you have Dave Ramsey, who would like you to cut them up, never look back, and focus every ounce of energy on eliminating consumer debt entirely. Credit cards, in his view, are a trap dressed as a benefit. Given that credit card companies continue to push rewards cards and they are literally in the money making business, the data on how most people actually use them backs him up more than the other side likes to admit.
However, both of them make genuinely good points and it cannot be denied used well credit cards have helped a lot of people. And as a money behaviours coach, I have a position on this debate that might surprise you.
I don't care which side you're on.
What I care about is whether the card is working for you, or you're working for the card and whether you're carrying a balance.
Let me tell you where I personally land, because I think it's useful. I don't use credit cards. I never really have. I was brought up with the idea that they were something to be wary of, and honestly, the more I've examined that instinct as an adult, the more I've found it holds up — for me.
I hate spending money and not seeing it leave my account. I hate not knowing, at any given moment, exactly what I have left. I hate the extra admin, checking the credit card account, making sure there's enough in the linked current account to cover it, transferring the money across, checking again.
And that's a lot of extra mental admin you could be adding voluntarily when you find money stressful to begin with. A lot of places for you to trip yourself up. If money is already something you find hard, adding another account to manage is not simplifying your life. It's complicating it.
There's also the fraud question, which I don't think gets talked about enough. I've had cards cloned. And the stress of sorting it out, the uncertainty about whether the balance will be covered, the sleepless nights while it's being investigated is not for me worth any points scheme.
And then the bit that really bugs me: your credit rating is partly built on your ability to manage a credit card responsibly. Which means you're almost required to have one just to prove you can handle one. The system has a slight circularity to it that I find frustrating. This made up thing requires you to add complication into your life, which begs the question who are they really serving?
But, and this is the important part, none of that means credit cards are wrong for you. Some people genuinely can operate within the confines of one without stress, without overspending, without the balance creeping. If you pay it off in full every month, every month, without exception, and the points or cashback actually add up to something meaningful for your level of spending, and the admin doesn't add to your mental load, then fine. Use one. Tori has a point.
Plus I cannot deny they have helped people out of a pickle more than once.
The question to ask yourself is honest and behavioural, not financial: do you see a credit card as a tool with clear edges, or does it feel a little like free money? Because if it feels like free money, even slightly, that's important information. The interest rates on rewards cards are brutal. One slip, one month where you don't clear the balance and you've wiped out months of points accumulation.
This week's AND: I don't care whether you use a credit card AND I care very much about whether it's working for you or against you. That's a question only you can answer honestly.
What's your AND this week?
---
This week's tip — 10 minutes, real impact
The one credit card rule. And how to decide if it's for you.
If you use a credit card or are thinking about it, there is one rule that matters above everything else: pay it off in full, every month, without exception. Not the minimum. Not most of it. All of it.
If you can do that consistently, if you have a direct debit set up for the full balance, not just the minimum payment then you're using the card as a tool and the card isn't using you.
If you can't do that consistently, or you're not sure, or the thought of setting up that direct debit makes you slightly nervous, that's your answer. That's the behaviour telling you something worth listening to.
This week's tip is less about mechanics and more about being honest with yourself. Ask these questions:
Do I know, right now, what my current credit card balance is? Could I pay it off today if I needed to? Does managing the card add to my mental load or reduce it? Am I getting enough value from the points or cashback to justify the complexity?
If the answers are confident and clear, great. Set up the full direct debit if you haven't already and carry on.
If the answers are uncomfortable, also great. That's useful information. Uncomfortable answers are the beginning of change.
Answer the questions honestly and quickly. Listen to your gut, not the finance experts and decide.
---
See you next week.