Why I’m Getting a Credit Card After a Decade Without One

Credit Cards, Dave Ramsey, LegoIf you read my recent post about My History with Debt, you know that we amassed $20,000 in credit card debt a decade ago. Realizing the error of our ways, we canceled the cards, and began an aggressively repayment plan.

During the debt repayment process, I found inspiration from Dave Ramsey. You know, the “debt is dumb”, “credit cards are evil” guy. While there were a lot of things I didn’t agree with him on, the ‘debt is dumb’ concept wasn’t one of them.

I fully expected that I’d never own a credit card again. I was not only okay with this, but also quite proud of it.

After paying the last payment on our student loans and achieving debt freedom, I was at a bit of a financial loss. It was great being debt free, amazing in fact. But the goal I had worked towards for 8 years was now over. I felt directionless.

In the last year of our debt repayment process, the goal of debt freedom felt inevitable. Prior to that it had felt like a daunting impossibility. Dave Ramsey’s message was so helpful during that stage. But as we neared completion, I felt like I had outgrown his message.

Around that time I had started reading personal finance blogs and finding new financial influences. These new voices agreed that the debt had to go. However, they also introduced the idea that credit cards weren’t evil, but rather a tool.

I didn’t disagree with this idea. However, I also had a history of irresponsibility with that particular tool. I figured why tempt fate.

What Changed My Mind?

Over the past couple of years a few things have conspired to change my mind on owning a credit card. First, a decent sized emergency fund has made me a lot more comfortable with owning a credit card again. I know that I can easily wipe out any amount of money I rack up on the card.

Additionally, I have the painful experiencing of having spent 8 years repaying debts. If the past 8 years haven’t taught me responsibility with a credit card, then nothing will.

Finally, we’ve begun to travel more. This has affected my thinking in two ways. First, having to pay an extra $8 a day on a rental car, just because I was using a debit card instead of a credit card. Second, I’ve learned more about travel hacking. While I’m still new to this idea, I’ve been reading more about it and want to see for myself what it’s all about.

Conclusion

With the Great American Road Trip on the horizon, I thought this would be the perfect opportunity to give travel hacking a shot. However, I plan to venture back into credit card ownership with an abundance of caution.

Self-imposed rules:

The card will be paid off as quickly as possible. I won’t know exactly what this looks like until I get the card and make my first payment. However, I’m guessing it’ll be within days of making a purchase.

  1. I can’t spend more than what is available in our checking account. (With the exception of preplanned expenses.) If the money isn’t in our checking account, we can’t charge it on the card.
  2. I can never, under any circumstances carry a balance on the card. If I end up paying one cent in interest, I’ll cancel the card that day and give it another decade.
  3. In order to keep the card, I have to realize some sort of benefit. I’ve heard numerous statistics about the low percentage of credit card owners who actually get some benefit from their rewards. This article cites just 15% of travel rewards earners have used their rewards.

I’ll write a follow-up to keep you updated with how my foray into travel hacking goes. In it I’ll give more details about the card I will use and the benefits I’ll claim from it. For now, I’m cautiously heading back into credit card ownership.

I’d love to hear from you, let me know what you think. Have you had success with using credit cards for travel hacking? Do you think credit cards are a bad idea? Comment below:

14 Comments

  1. Credit cards are definitely a useful tool when used properly. You seem like a responsible young man to me, so I support your decision.

  2. Noooooo – don’t do it. Jk – you can do what you want of course. Of all the people that can responsibly manage credit cards I think PF bloggers can do it best. I of course preach no credit cards as you know, but that’s only because most people don’t pay attention to what they’re doing with their money. And I tend to spend more with a credit card than with cash. This is not true for everyone though. Good post – and don’t fall back in the hole.

  3. A cc is great for travel. You have made tremendous progress in paying off your debt. Based on all the work you have done, you will not have any issues.

  4. If you can use a credit card responsibly, it is always better than using a debit card. Credit cards offer increased security over debit cards and they also offer cash back, extended warranties, extended return policies, and retroactive price matching.

    Do you know which credit card you are getting? My two favorites are the DiscoverIt and the Fidelity VISA. The DiscoverIt has something called “double cash back.” You need to call them to activate it, but it will increase the cashback from 1%/5% to 2%/10% for a year which is incredible. It also doubles their Discover Deals. I’ve gotten 40-50% cash back from stores like Nike.

    The Fidelity VISA is my favorite because it gives 2% cashback on everything and deposits it into my investment account. It forces me to save cashback instead of spending it.

    1. I got the IHG card for hotel points. I’ll try to squeeze as many nights out of the sign up points on our upcoming road trip.

      40-50% cash back is crazy!! You haven’t already, you should write a post on how you pulled that off.

      Smart move using the cash back to fund your investment accounts. Make the Credit Card companies fund your early retirement!

  5. We have a few credit cards we pay off every month, usually before the statement is even processed. I never felt the need to give them up since we use them responsibly.

    I’d like to see how you do with travel hacking. I don’t have much patience for it but if I can do a few basic things to reap rewards, that would be nice. I do think.

    1. Sounds like you guys are wise consumers of credit, that’s the only way to do it. I wish I hadn’t made the mistakes I’d made, but lesson learned.

      I’m with you, if I can get a few rewards out of it, I’ll be happy, I don’t think I’ll be a 20 credit card travel hacker by any stretch of the imagination. I appreciate you stopping by!

  6. I think credit cards are great in the hands of the right person. I pay mine off in full each month. I do not want debt although I have some now. We recently purchased our home..yes it was time. Beautifying and repairing eats up the money quick! and the cc does come in handy when they give you 12 months no interest to pay off the balance!

    1. Totally agree. I see Credit Cards as a tool, when in the right hands they can be very beneficial, but when in the wrong hands, it can make a mess. Thanks for the comment!

  7. I don’t think credit cards are a bad idea if you use them wisely. We both canceled our credit cards before getting married, but then Omar got one right before the wedding “just in case.” We ended up using the credit card only for vacation purposes and we would already have the cash saved up to pay it off. We just found it easier to do our budget that way. I have a credit card now because sometimes when I would try to use Omar’s, the cashier would give me problems.

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