Is It Worth Having A Credit Card To Earn Points?

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In our column #DearBernadebtJoy, personal finance and debt-free living media expert, Bernadette Joy answers all of your money and debt questions.

Today, she answers a question that so many people wonder about: Is it worth having a credit card to earn points?

I quit using credit cards three years ago, to pay off all $300,000 of debt including my house. To be clear, I’m not against other people using credit cards, I just don’t use them myself. However, when someone hears this, they inevitably ask, “What about the points? Why wouldn’t you use them?” This then turns into a disguised defense to why they use them.

Nobody really cares whether or not I use credit cards, what they are really wondering is whether or not their credit card usage is justified by earning points. After being asked this time and time again, I instead learned to ask these nine questions. And if the person can say yes to all 9, I don’t have a particular objection (but I still won’t use them). That being said, if you say no to even one of these, it is worth questioning if credit cards, and their points, are really worth it for you.

Start with the basics:

Do you have a steady income?

Self-explanatory. Without consistent cash flow, credit cards are more likely to build debt that cancel the point benefits.

Have you never carried a balance?

If you have never paid credit card interest in your life, then the points could be worth it. But it’s more likely that you have, as 55% of Americans have credit card debt. If you’ve ever carried a balance, even sporadically, you are really paying for your points, just in the form of interest payments.

Can you pay for all your expenses for a month without a credit card?

Even with a steady job and never carrying a balance, once I cut up my credit cards, I overdrafted my bank account. It was a clear sign that I spent money I didn’t have, at the time I spent it. Until then, it was masked by my usage of credit cards. When I used cash and a debit card, it became clear whether I could afford my bills or not.

Question your financial stability:

Do you have an emergency fund other than your credit card?

Someone once asked me how to cover emergencies if she didn’t have a credit card. Since my husband and I stopped using credit cards, we have had a washing machine flood, a roof leak, removed trees dangerously close to falling on our house and had to pay for four stitches on my husband’s hand (thanks to a vegan brownie cutting fiasco). We have not once used a credit card, thanks to having at least three months worth of cash in an emergency fund at all times. 

Are you debt free?

If you have no debt, using a credit card for points might be okay. But if you are making minimum payments on student loans, car payments, unpaid medical bills, or any unpaid bills for that matter, you are likely overextended already.

Are you maxing out your retirement funds?

For 2020, total contributions to all of your IRAs can go up $6,000 ($7,000 if you’re age 50 or older). If you have access to something like a 401(k), then you can contribute up to $19,500 this year. If you are easily maxing these out with money to burn, then yes, those miles can come in handy, especially if you’re tracking to retire early and travel often.

Now, let’s think about your emotional well-being:

Are you sticking to a monthly budget?

Every month you look at your bank account and know exactly how much money will be in there. Chances are you’re already meticulous about your spending, and if a credit card wouldn’t change that, then sure, points can be a bonus.

Are you proud of how you spend your money?

If someone close to you saw your credit card statement, would you be comfortable with what they find? If you’re hiding spending from a partner, friends or family, this could indicate that credit cards are causing more harm than good.

Would you feel secure not having a credit card?

In reality, you can benefit most from credit card points when you don’t need credit cards in the first place. If the idea of not having a credit card causes a feeling of panic, it may be a signal to focus on your finances as a whole, and not just racking up points. Not having used a credit card in three years, and being 100% debt free has given me more financial peace of mind than any piece of plastic ever did.

Bernadette Joy is a multimedia debt free expert based in Charlotte, North Carolina. She is currently enjoying #debtfreelife after paying off $300,000 of debt in three years. Follow her fun, debt free tips at @bernadebtjoy.

Feature Illustration: Laura Caseley For The Money Manual. Other Photos: Twenty20.