I just read an interesting article written by Andrew Housser. According to his bio, he’s the CEO and co-founder of Bills.com and the Freedom Financial Network. He also holds a Masters of Business Administration from Stanford University. Although he certainly has some excellent credentials, I can’t say that I agree with him on every point. In fact, some of the advice that he provides in the article I would consider bad (for certain people).
While I agree that you should NOT charge these expenses on a card if you’re not planning on paying the balance in full, I don’t agree with his premise that you should NEVER use a credit card for these type of expenses. If you’re smart about your financial affairs and you plan and budget accordingly, you shouldn’t have any problem paying these regular monthly expenses with a card and paying down the balance at the end of the month.
I think my biggest problem with Mr. Housser’s opinion is his premise that people, in general, are basically incapable of being responsible enough to pay down their card balances every month. While there are certainly people that are financially irresponsible no matter what the situation is, it’s still probably not a good idea to make such a broad, sweeping generalization about this particular topic. For some of us, being told to ignore the benefits of what credit cards can bring, especially for those of us who religiously pay down our card balances, and advising us to ignore them altogether is simply bad advice. Aside from the rewards you can earn, which is probably the most outwardly noticeable benefit, you also get some pretty stout purchase protection and other benefits that debit cards and cash simply cannot provide.
Now, one area I do agree with Mr. Housser on is purchasing a vehicle with a credit card. Mr. Housser advises against it because the interest rate that you’ll pay on your credit card will typically be higher than the APR on any loan backed with collateral (your car). In general, I agree with this on principle, HOWEVER, I do think it’s worthwhile to look into special promotional interest rates offered by card issuers and then crunch the numbers.
For example, my spouse and I purchased a used truck earlier this year and we got a 3.9% APR with a credit card that would remain until the “life of the balance” had been paid in full. In this particular case, it made much more sense to use a credit card.
Mr. Housser also advises against charging medical expenses that aren’t covered by insurance. I wholeheartedly agree with that. Work out a payment plan with the medical facility directly rather than be trapped by the onerous cost of those high APR finance charges.
My bottom line advice is that you need to be smart with your credit card usage. Don’t spend what you don’t have, and if you’re going to use a credit card, pay down that balance every month NO MATTER WHAT. That’s how you can really take advantage of credit cards.
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