When Should You Use a Credit Card for Rewards

My simple wallet of a just a few cards. Normally it magnets to the back of my phone.

This is a picture of my wallet, simply a debit card, 1 Visa, and my license. I have another wallet just for cash, insurance cards, and a few other things, but my main one is in the picture. Yes, I have a credit card, despite Dave Ramsey's advice.

I hear this all the time and I've written articles on why they are not worth it, but there are times and circumstances when they can make sense. As a Ramsey Financial coach and follower for the last several years, this is 1000% on the "ish" side of Dave Ramsey. Actually, no this is directly opposite of everything he teaches and preaches. Let me explain why he takes this stance, why many people should avoid these credit card traps, and when it is ok to dabble with points and travel rewards.

Back in October 2023, I gave a detailed overview of travel rewards and credit card points and why they are not worth it, in many cases. If you have not previously read that or need a refresher give that one a read here. There I give you what I went through with travel rewards and touch on some of the games, with the largest reason being that 50% of people who plan to pay it off every month do not, or they spend more than they realize each month.

That was my case about 5 years ago. I make a good salary and we were just living month to month, no plan just going out to eat, buying groceries, etc. At the end of each month, I paid off the credit card, and until one month I could not quite do it. I told my wife we needed to cut back next month, which we did and then within about 2 months, we were back on track, only to fall into the trap again later in the year. I hate paying interest on things, it kills me to know that $100-200 is leaving my wallet each month for nothing but my mismanagement.  

Here I am in 2025, I cut up the airline card I had got back in 2023 for my son's flights, and now have a Chase Sapphire card, which I have very direct reasons for using. That card gives me cash back for purchases, which I have already budgeted for.

Dave is completely against what I am doing because he is against credit card companies overall. His entire brand is built against credit and the people he helps have a serious problem with credit. What is a serious problem with credit? If you have more credit card debt in a month than you can pay off then I would say you have a problem. If you have more credit card debt than you can pay in 3-6 months, then you have a serious problem. For that reason, I would cut up your credit cards and stop using them immediately. It is time to realize you have a problem.  

I don't wrong Dave for this area. I do disagree on the premise that your rewards on based on the faults of others. The rewards are based on the fees they collect from merchants who accept the payment. After all, if you want to shut down the credit card companies you have to stop using a debit card too, because there are merchant fees associated with them, just like a normal credit card, but without the rewards.

Why get a credit card for travel rewards or cashback? Some people love the "free" aspect of travel rewards or cashback and so that is the motivation for them to use the card, which by the way is exactly what the card companies want you to do. As I describe, personally, I do not love playing around with flights, planning around optimal times to fly, dates, etc. I just want to book a trip and go. That is why I chose the cashback option. I use the card, for my budgeted purchases and then pay off monthly based on the cash in my account that was already budgeted for. I use it for very specific purchases only and have rules that go along with its use.

1. There must not be a cash discount available. Many places nowadays will offer a cash discount, but this only applies to literal cash in hand. Debit cards still cost the business fees. If I have the cash, I will always take the cash discount, it is better than the cashback every time.

2. The purchase must be budgeted for. If it is not in my budget then we are not buying it.

3. Is it a really large purchase that I have already budgeted for and there is no cash discount? For example, I paid my son's tuition for the semester on the card. That gave me time to get the early payment discount, get additional cash back on the purchase, and time to pull the money out of the 529 set aside for his college.

4. Is it pre-saved vacation spending? If that is the case, I will use the card because it helps me keep what we are spending on vacation in a single compartment, and then I transfer it out of my savings to pay it off.

5. Most important, it must be in the budget!

Overall, last year, I got about $500 cashback with the rules above. Now I do not use the card for gas, groceries, or things like that yet due to some of the large purchases that are happening and generally to keep control in those areas, not to mention GasBuddy gives another 6 cents a gallon discount when used with your debit card. Eventually, we may move most over to the card and will get more back. Is this making me rich? No, not at all, but is nice to get something back for being wise with our spending and paying it off regularly.

Are you ready to step into using a credit card? Why? Know your why and do not do it because you want to buy something large and pay it off. Here are some steps to consider.

1. Are you already living on a budget and keeping track of where you spend? If you are not, then spend some time getting on a budget. Head over to the budget section here to figure out how to budget and get started. If you need help, let's talk and set up a free consult.

2. Start slow! Maybe begin just buying all your groceries on a card. Remember though, just because it is on a card, does not mean you can go over your budget, so start tracking.

3. Continuously do a check on yourself. If your months are getting beyond your pay, then credit cards are not right for you. You have to live within your means.

4. Keep it simple! Do not get a card for each thing you buy. Some people have a card for gas, a card for shopping, a card for... You know who you are. Stick to one and keep it simple.

5. Finally, my last big one. Stay away from cards with yearly fees. Know what you are getting for those fees. There are cards out there that charge up to $500+ a year in fees. Very few people can benefit from these. Just stick to the no-fee cards.

If you can do these 5 things above, then you might be able to use a credit card but realize only 50% of this country fits that mold. It is still best to focus on living on less than you make and saving for your future. No card is going to give you peace, special rewards, or make you rich. They are REWARDS for a reason, rewards for being used properly.

Peace comes from managing things well, living on less than you make, and saving for your future. That is how you get peace.