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I never got what it is with Americans and their credit cards. Why does one need several and what's up with those credit limits? If you're buying on credit it by defintion means you can't afford it and thus shouldn't buy it. I do have a credit card as well but the only thing I use the credit side for is online purchases for security reasons. Everything else is charged directly from my bank account.
Buying it on credit doesn't mean that that's the only way you could buy it. I buy everything on credit, and I've paid about $50 total in interest in 10 years of doing so, a number far outweighed by the hundreds of dollars of rewards I've redeemed.
Now, obviously the bank wouldn't let me do this if not for the fact that people as a whole pay more in interest than they redeem in rewards, but that doesn't mean that any given individual does.
Not only interest, but the transaction fees. The financial institutions make big money on the transaction fees, and generally the rewards are less than the transaction fees, so they can't even possibly lose money on the deal.
This is pretty much what I do. I get cash back and have a very good credit score because of it. I usually pay it off completely every month. If for some reason I dont/cant I pay enough such that I do not have to pay interest. So yeah, free money! It doesn’t really make sense to use debit over credit (assuming you are financially responsible)
I was thinking the same. The limit was only 5k? We live in very different worlds lol.
The only reason I want a limit that high is to be able to book a group holiday on it. (With people I trust to pay me back). So much less stressful (and lucrative if you have a rewards card)
Credit cards = Free Money
1-5% cash back at most stores
So you can either pay in cash (or debit card) and get nothing. Or you can use a credit card and get 1-5% cash back
I need to spend $300 on groceries this month. If i had a credit card that did 5% on grocery purchases (one reason for multiple cards), then I'd have an extra 15 dollars this month. 180 dollars a year just because I used a credit card for a purchase I had to make.
I could have used my debit card, and the funds could be pulled directly from my checking account. Or the funds will be pulled directly from my checking account at the end of the month when I need to pay off my balance.
If I had an emergency $300 dollar expense in the middle of the month, I would have access to $300. If i purchased the groceries with the $300 in my checking account, I'd have no funds to hold over for 2 weeks. Longer if needed, a credit card can hold a balance for a price.
There really isn't a reason why you shouldn't use a credit card in America, other than poor spending habits
Credit cards can even give you perks like free cell phone accident protection when paying your wireless bill
Have multiple cards with multiple limits = higher available debt
The higher your available debt, the less percent you use out of it
Debt utilization is a big part of a credit score. And just getting that down having multiple high limit cards is a strategy.
Like if I spend 5k a month. One card with a 10k limit I am using 50% of my available credit. If i had 3 cards with 15k limits, I'd be using ~10%. Using 10%>50%
Opening up cards hurts your credit score in the short term but helps in the long run. You shouldn't close a card unless you have to because having it is going to help your score for reasons mentioned above.
I have a really good credit utilization rate, in part because of this. I don't spend money I don't have, because I make enough money to cover my needs, set aside savings for emergencies, and treat myself sometimes. And I'm privileged to have people in my life who educated me about credit, what it actually means, and how it works.
Because of these privileges, using credit cards has saved me money by earning rewards and not paying interest. But many Americans don't have these privileges, which is why I think it's downright irresponsible and predatory that my combined credit limit is higher than my annual salary. Not home or car loans or whatever, just regular credit cards for regular consumer purchases. That's a life-ruining amount of credit to have available if you haven't been taught how to game the system.
There are a couple of benefits to credit cards (in the US at least).
If you pay off the card each month you get all of those persk at zero cost. While technically credit card companies charge stores 2-3% for each swipe, in the US at least there is no price difference for the customer for cash/debit/credit.
Edit/TLDR: In the US it's cheaper and safer to use a credit card (if you can pay the balance every month).
I’m extremely anti-credit. But, there are things that require you have some kind of credit score— like renting an apartment. When I was in Los Angeles, I was actually rejected from signing a lease because I had no credit. Not bad credit. None at all, which they said was actually worse, somehow.
Thanks for the help!