Raise your hand if you’ve been spending too much money lately!
This inflation is really starting to weigh on my bank account, but I can’t even imagine how much worse it would be if I didn’t have my credit card. When I first opened my account with Discover back in January, I was nervous about having a credit card because of the possibility to spend without the money being instantly taken away from me. It’s too much power and responsibility! I have enough things to worry about! Like staying alive!
But after a few months, I realized how superior it was to use my credit card for practically everything. When I got my first cash-back bonus, I was thrilled to have some free money! So far I’ve just used my cash back to pay off my credit card, but soon I hope to save it up and use it for more exciting things (there may be a juicy Sephora gift card in my future).
I also shifted most of the pay-later options I use—like Klarna and PayPal Pay in 4—from my debit card to my credit card. This way, it’s like double credit (I know, my head exploded just thinking about it) and I don’t have to do any math in my head when I get an email alerting me about one of my four payments coming up. I know that my Discover card has it covered, and that my bank account will thank me for the break.
Since I’m roughly six months into my credit card journey, I wanted to revisit some of the personal finance books I’ve been reading to recenter my thinking. In Bola Sokunbi’s “Clever Girl Finance,” she discusses cash-back and rewards credit cards, and her advice comes with a warning: “The thing about cashback and rewards credit cards is that, while they are a perk for the cardholder, they are also a strategy that credit card companies use to get their cardholders to spend more money. If you are motivated by an incentive like cashback, you are more likely to shift your focus to wanting to obtain as much of the incentive as possible, which can lead to overspending, especially on low-cost items. This strategy is beneficial to credit card companies because it allows them to make money from interest accrued on credit card balances you can’t pay off.”
The good news is that I won’t be tricked by credit card companies into spending more money; the bad news is that inflation has already done that for me!
The discussion of rewards credit cards got me thinking: Since I’ll be traveling on an airplane tomorrow for the first time since 2020, should I get one of those credit cards that gives me miles?
Sokunbi’s “Take Action” section at the end of her credit card manifesto says the following: “1. Be sure to find the right type of card with a reward that suits your lifestyle. For example, if you travel a lot, a rewards card with miles or travel upgrades might be a great option for you. 2. Be aware of the timeline and expiration around which your rewards or cashback can be redeemed. Use the rewards within that timeframe so you don’t miss out. 3. Avoid carrying a balance on these cards and be mindful of your spending when you use them. Always defer to your budget to make sure you are staying on track.”
Thankfully, I’ve got these three things covered with my Discover card: The cash-back rewards are working for me, I know that I’ll be getting my cash back matched by Discover at the end of the year and I’m avoiding carrying a balance on it like the plague.
However, I think I’ll pass on getting a second credit card for now. I’ll see if it becomes worth it to get a card with miles as I hesitantly start traveling again.