March 2011 is going to be another great month for those who hunt down the best credit card deals, and make our good credit work hard for us — rather than the other way around. Just the other day, I wrote on here about the United Mileage Plus sign up bonus that is the best card offer I’ve seen so far this year (to summarize: two free flights, and a $50 statement credit, all after your first purchase).
Along with the return of tempting credit card rewards, though, comes the misguided little troupe of personal finance bloggers who despise plastic.
These folks think that debt and credit are always evil, and their black and white thinking reminds me of the stupidity of the ‘temperance movement’ that ultimately led to one of the dumber decisions our country has ever made: Prohibition.
I don’t think we’ll ever see a credit card Prohibition, but I do think these ‘anti-credit gurus’ are harming their readers and followers.
When I spent too much on my cards several years ago, it wasn’t as if Bank of America pointed a gun at my head and said I needed to run up my entire credit limit buying stuff on Amazon and buying $220 euro-trash jeans at Diesel.
Plastic wasn’t the problem. Lack of self-control was… And I guarantee you, if you’re one of those people who uses ‘cash only’ because you might spend wildly beyond your means on a credit card, you don’t need to fear the banks (the consumer credit industry in the United States is now more regulated than it has ever been, probably since the start of human commerce).
If you have an underlying lack of self-control, you will find an outlet for it: gambling too much at the casino, drinking too much, making risky decisions at work, etc.
If you are a normal person without addictive tendencies, however, there is no legitimate reason to shun credit card deals or plastic. Pay off your balance in full each month; treat your credit card as a ‘deferred’ debit card or charge card.
This way, you will accrue cash back on every purchase you make, or air miles or hotel stay points depending on which card you use. Plus, you build a stronger credit history every time you make a payment to the card company on time.
Oh, one other thing: the anti-credit folks claim that you spend less when using cash than when using plastic. This might be a generational divide, but at least for me, the exact opposite is true.
When I take out cash at the ATM, I spend it until it’s all gone typically, and then there is little accountability for where it went. It doesn’t even feel like real money to me. At a bar or night club, it’s easy to ‘make it rain’ when you have lots of cash on hand.
With plastic purchases, however, there is total accountability. If I act like an idiot and pay for a VIP table and bottle of Moët to impress some girl I’m out with, the very next morning I see that very dumb financial decision (although perhaps excellent personal decision!) staring me in the face on my recent account activity page.
Secondly, I have a set spending limit on each of my cards. After hitting it, the bank sends me an email and text message alert that I’ve crossed my personal limit. This acts as a little angel on the shoulder, reminding me that I’m starting to spend more than I perhaps should.
What about you, though? Are you able to use credit responsibly, or have the anti-credit zealots brainwashed you into believing you lack the self-control for anything other than simple cash transactions?
Be sure to view more of my credit card offers and promotions over on Outlaw.
Disclosures: I used to review credit cards for a living. Also, my web site has a financial relationship with Chase — we participate in their affiliate program. No financial relationship or position on Bank of America, Moët Hennessy, or any other company mentioned in this story at time of publication.