Next to politics, the subject of credit cards probably creates the second hottest debate. Should you use credit cards at all? How many credit cards should you have? How should you use your credit cards? These are just a few of the questions related to credit cards. One other is whether you should use them to save more money?
They are convenient
There is no getting around the fact that having a credit card makes shopping easier and more convenient. However, some financial experts think that there is no place in a savvy shopper’s wallet for credit cards. But there are others who strongly believe that using a rewards credit card can lead to extra savings at the grocery store – if you can avoid the pitfalls associated with them.
A better deal
While there are rewards cards that come with points you can redeem for travel, merchandise or gift cards, the best deal for shoppers may be cash back cards. And according to Consumer Reports the best card for cash back as of November of last year was the American Express Blue Cash Preferred. It can get you 6% cash back on as much as $6000 worth of supermarket purchases each year. If you have a fairly large family and spend that much on groceries, this works out to $360 cash back for the year.
It’s not all good
However, there are two downsides to rewards credit cards when you use them to buy groceries. The first is that you run the risk of spending more than you had intended. In fact, financial gurus including Dave Ramsey have said that using a debit or credit card as the will cause you to overspend your budget by 12% to 18%. While these numbers are difficult to validate, it just makes sense that it’s easier to spend more money when you use a credit card.
The second pitfall
The second pitfall can be summed up in one word – debt. If you’re already up to your eyeballs in debt, using even a rewards credit card is not a good idea. In fact, if you find you cannot pay off your balance each month, it just wouldn’t make good financial sense to charge your groceries. On the other hand, if you’re a good financial manager and have good self-discipline, using one of these rewards credit cards could be a good way to save money on your grocery budget.
Uncertain about where you stand?
If you’re not sure how well using a credit card at the supermarket would work for you, test yourself. Put enough cash for a month’s worth of groceries in your savings account. Then use the card for a month. Watch your spending, especially when it comes to impulse purchases and if you’re going over budget. When you get your statement the end of the month, take out money from your savings and pay the balance on your credit card bill. If you have enough to pay your balance or maybe even a bit more, you have your answer. You should be able to use that cash back credit card to buy groceries. However, if you come up short, stick with cash and put that credit card on ice.
The important thing to remember is that the only reason to have credit cards is if they can help you meet your financial goals. If they don’t , you might want to shred them.
Don’t carry balances forward
The first rule of good credit card management is to never carry balances forward from month to month. This is where people who get in trouble with debt get in trouble. If you carry a balance forward once, you may find it easier to carry it forward again and again. You may find you can make only your minimum monthly payments and the size of your debt will keep getting bigger and bigger like a snowball rolling down hill. Paying your balances each month is just the smart thing to do.