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How I Deal With Credit Cards

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I’ve had a credit card for 8 years now and haven’t built up any debt. I’m not one of those people who point hack using their credit cards to incur benefits and free travel, although that’s something I’m certainly interested in. My credit card use is fairly simple and I think that’s part of the reason I’ve had so little problems with it.

I use my credit card only for online purchases, such as:
Online groceries
Ordering clothes/shoes online (these things are much, much cheaper overseas)
Paying bills such as Internet and power
Topping up my phone
Booking things online, such as movie tickets
My gym membership

This means that my credit card purchases are limited to a few purchases a month, making it easy to keep tabs on them. My credit card also has a tiny, tiny limit of $500. I don’t make credit based purchases unless it’s an emergency (and at the moment I’m trying to build up an emergency fund). Whenever I log into my Internet banking I make sure my credit card is paid off. Whenever I make an online purchase, i.e. a payment from my credit card that is not automatic, I transfer the funds.

Many people have problems with credit card spending because they spend money they don’t have.

When I first moved out of home I moved in with my boyfriend at the time. We were both 18, fresh-eyed and heading off to the ‘adult’ world of college and credit cards. When we signed up for our student banking accounts, we were both offered credit cards and we both got one. Mine had a $500 limit, his had a $10,000 limit. Needless to say, within a few months his credit card was maxed out. We were both studying full-time and I estimate his income would have been in the 30-40,000 per year category.

$10,000 is a lot of money, especially when you’re earning at that rate. Throughout the course of our relationship, he was constantly making payments and sometimes would get part of the debt knocked down, but then it would creep back up with the next expensive thing he bought. I, on the other hand, ensured that I always had more money in my account than debt on my credit card.

I treat my credit card as a way to spend money (online) that I already have.

I’ve never bought anything on store credit or hire purchase.

I firmly believe if you can’t afford to pay for it now, you shouldn’t have it.

How do you use your credit cards? Do you collect points on them? Do you rack up debt or pay it all back each month? Let me know in the comments below. 

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12 Comments

  • Since you don’t carry a balance at the end of each month, how quickly has your credit score risen? I’ve read it takes a long time to get a high credit score if you’re never really in debt.

    Also, it’s soooooo refreshing to read a post about credit cards without a personal story about how you’ve gone through hell and back with a credit card (as seen on almost all other PF blogs). Nice to know some people can be responsible right off the bat.

    • Christine says:

      This might be a dumb question, but how can I check my credit score? I think mine’s pretty good as I (after writing this post) applied for a new Credit Card for the following reasons:

      A) to get free travel insurance
      B) to get free airpoint membership
      C) to build up airpoints

      And guess what limit they gave me? Oh you know, just $25,000! in CREDIT! What the hell! That’s almost what I used to earn in a year in credit card balance, ew!

      I grew up poor (I’m planning a “What growing up poor taught me about money” post soon!) and so I think I am a lot more mindful about money than most. The only thing I went crazy on was my student loans.

  • https://www.creditkarma.com/ will give you a free credit score. I haven’t tried it personally but I’ve had PF friends say it has worked for them.

    $25k in credit! Woot woot! Don’t you know you’re supposed to buy something frivolous with that money?! 🙂

    • Christine says:

      I haven’t even used the card yet. It’s attached to my business account so I’m trying to figure out how I might use it to make the most of my business spending, but also personal spending, without getting it all messed up and spending too much. Thanks so much for the link! Great website name, eh.

  • […] So now that we’ve cleared up the fact that the available balance on your credit card is just potential debt you can incur, please remember it’s a bad idea to use your credit card as a deposit to finance something else. Many people wonder whether it’s a good idea to use a credit card as a deposit for car finance and the answer I have for you is a resounding: “NO!”. If you use your credit card as a deposit for any type of financing, you’re essentially getting yourself two loans. Credit cards have a large interest repayment rate which can often be disabling, especially for large sums of money. If you really need to finance something but don’t have the deposit, you would be much better of getting a low interest loan from a bank. Personally, however, I wouldn’t finance anything especially if you cannot afford the deposit. […]

  • Frank Moreau says:

    If anything the way you use your card should improve your credit score greatly. You are using it therefore it is active, this is not a worry. If you are only using a small percentage of that $500.00 or paying it off almost immediately, though scores can be calculated at any second, your credit utilization ratio score should be good; this makes up 30% of your credit score.

    In essence it is better to check your credit reports than your score. If your reports are good (R1) and you keep your credit utilization ratio’s low (not exceeding 30% of your available credit for purchases) you should be great.

    • Christine says:

      Hi Frank, thanks so much for that helpful break down! I wasn’t intentionally spending that way to improve my credit card, although mindful of it, it’s just what has worked best for me over the years and prevented me from getting carried away with credit. I really appreciate you breaking it down. I popped over to your site to comment, but I can’t seem to leave any comments? Is this normal? Anyway, thanks for dropping by and sharing some of your knowledge 🙂

      • Frank Moreau says:

        I will be adding a comments widget on my site within the next day or too and I will be enabling comments. I just wanted to make sure my template was up to par before doing so.

        I appreciate you visiting my site and I hope you found some of it interesting.

        The way you are managing your credit is quite intelligent. You are one of those folks who leads by example and you should be proud of your accomplishments.

        Frank Moreau

        • Christine says:

          Thanks so much Frank. I really enjoyed your site, I feel like you have a wealth of knowledge in this area. Looking forward to dropping by and leaving some comments when it’s all finished.

          • Frank Moreau says:

            I would be honoured to have you comment on my blog and I am glad that you liked it! 🙂 You can leave comments as if this moment on my last entry.

            Thank you for the kind compliments. It is always nice to read. 🙂

            Frank

  • Liran says:

    Hi Christine (and others),

    I’m working on a new tool that will let you use your credit cards but debit money on a daily basis from your checking account – so you can get all the benefits and security of credit with the financial responsibility of debit. Take a look at http://www.debitize.com and feel free to reach out with any comments, questions, or feedback – would love to hear from you.

    Regards,
    Liran

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