How Should You Not Use a Credit Card?

“I know a baseball star who wouldn’t report the theft of his wife’s credit cards because the thief spends less than she does.” – Joe Garagiola

You now know how to master that plastic and why your credit score is so important. What about behavior to watch out for? Are there any certain credit card usage techniques that need to be avoided? You already know the answer. There are plenty.

I didn’t want this section to be 45 pages long so I narrowed it down to the biggest culprits when it comes to credit card mistakes.

Let’s take a look at two ways that you should NOT use a credit card:

Using a rewards credit card as encouragement to spend more money.

Don’t laugh just yet. I realize that nobody out there’s going to get a rewards based credit card with the intention of spending money foolishly. We don’t actively plan on doing anything stupid, unless we start the evening off with 8 beers.

The inherent risk with a store specific rewards credit card or any incentive-based card is that it might lead to an increase in spending. As I mentioned earlier I’ve been guilty of spending money on my credit card idiotically out of convenience. Well, reward cards are public enemy number one here. It’s easy to get tricked into buying some useless crap or spending more money to earn more rewards.

How many rewards do we even need? Is it worth spending extra money on crap that we don’t need to earn some useless rewards? NOPE.

If you already have one of these cards then you need to guarantee that you’re not unwisely spending money in pursuit of some useless rewards. Certain rewards can be helpful if you don’t have to spend additional money to chase them.

Treating your credit card like an emergency fund.

Your credit card is not “emergency” money. I’m sick and tired of this excuse. Your credit card is not an emergency fund.

Using your plastic for an emergency is acceptable if you forget to bring your cash with you or your money is in your online savings account and you can’t withdraw the cash for 3-5 business days. This should only happen to you once. A credit card shouldn’t be there to always bail you out. That’s what savings are for. An emergency fund (or savings account or whatever you want to call it) is what you can use to bail yourself out of a financial mess.

It’s not cool to blindly use your credit card and justify it as an emergency expense.

If you don’t have the money to buy that $200 pair of shoes, then you really shouldn’t be putting it on your credit card. If you don’t have $30 for a cab ride home maybe you shouldn’t be going out so far away. You won’t save money if you keep on creating excuses for yourself.

If you need to pay for an unexpected expense and you only have your plastic on you, then go for it. Just make sure that you actually have the money somewhere to bail yourself out instead of getting stuck with a he?y credit card balance that will begin to accumulate interest. If you keep on justifying credit card transactions as emergencies then you’ll be in debt for the rest of your life.

When’s the last time you had a real emergency?

Mandatory action: Setup a real emergency fund or a different savings account! It’s critical that you have some money saved to deal with the curveballs that life will throw you. You can’t always rely on your credit card to bail you out because it will catch up to you real fast.

What are a few other ways that you shouldn’t use a credit card that I missed?

[Martin’s note: I’m sharing pieces from my premium guide, Completely Conquer Credit. You can grab the guide for only $7 now for a limited time if you enjoy the material.]

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