Used wisely, credit cards are safe, convenient, and rewarding. Here’s what you need to know.
Most credit cards, including those issued by CCCU, are governed by a zero-liability policy. That means if someone steals your card number and makes fraudulent purchases, you will not be responsible for those charges.
However, credit cards won’t protect you from yourself! Some people get in trouble with credit cards, letting their spending get out of control. In fact, I once had $20,000 of credit card debt that I carried from month to month. Waking up to the reality of my overspending and the four-plus years that it took me to get out of debt changed my life. That humbling experience was the catalyst that God used to draw me into a relationship with Him, and it led to my life’s work of writing and speaking about biblical money management.
Four rules of the road
My own experience with credit cards has given me compassion for those who have decided not to use credit cards. And it has led me to the conviction that credit cards can be used responsibly as long as people adhere to the following four guidelines:
1. Use credit cards only for pre-planned, budgeted purchases. If you have $50 budgeted for clothing this money, you can use your credit card to charge $50 worth of clothing this month.
2. Record your credit card transactions as you make them. When you pay for something with a credit card, you haven’t actually spent any money. You’ve incurred a debt that will be due when your next credit card bill arrives. A best practice for using credit cards is to record every credit card purchase right away. If you use an online budget tool, such as Mint, this will happen automatically. Whether you use an online budget or a paper & pencil budget, the key point is to count this month’s credit card purchases against this month’s budget. That way, the amount of money you have budgeted for this month’s expenditures will be available when your bill comes due.
3. Pay your balance in full each month. Taking step two will help ensure that the money will be available to do this.
4. If you can’t follow rules one through three, don’t use credit cards.
As long as you follow those four guidelines, using a credit card will bring valuable benefits. For example, with the cards issued by CCCU, if you rent a car on vacation, you can probably pass on the costly insurance the rental car company offers. If your trip is interrupted, cancelled, or delayed for reasons outside of your control, or if your luggage were to be lost, your credit card will provide some compensation. When you make a purchase, your card will automatically extend the manufacturer’s warranty and provide $1,000 of insurance if the item you purchased were to be lost or stolen. And, with CCCU credit cards, you not only earn points that can be redeemed for free or discounted travel, but each purchase you make will also generate a donation to various Christian ministries.
In all of these examples, of course, you need to have used your CCCU credit card when making the purchase.
Again, the key to responsibly making the most of all these benefits is adhering to the four “rules of the road” for the wise use of credit cards mentioned above.
Matt Bell is the author of Trusted: Preparing Your Kids for a Lifetime of God-Honoring Money Management. He speaks at churches and conferences throughout the country and writes the MattAboutMoney blog.
This article should not be considered legal, tax, or financial advice. You may wish to consult a tax or financial advisor about your individual financial situation.