Credit cards are a tricky subject for members of the LDS church. Our leaders teach principles of self-reliance and that we should avoid unnecessary debt. However, the average credit card debt in Utah, which is about 62% LDS1, is $5,5322.
“Proper money management and living within one’s means are essential in today’s world if we are to live abundantly and happily.”3
I’m a fan of credit cards. I think they’re a good way to build credit for free (as long as you pay off your balance in full each month and avoid interest). They also offer better fraud protection and benefits than debit cards4 or cash.
Not everyone likes credit cards, though. Some are vehemently opposed to them, and that’s OK. It’s possible to get into trouble with credit cards, so it’s wise for some people to avoid them. But it’s by no means an inevitability. If you follow just a few rules, responsible credit card use is possible.
1. Live on a budget
A few studies have found that using plastic can cause you to spend more. The reasoning is that it’s psychologically painful to hand over cash, but not when you swipe a card. There are also studies that prove the opposite, though, including this one.
In my experience, living on a budget is what keeps me from overspending. Budgeting is the foundation of money management. If we end up going over budget, it’s not the credit card’s fault. It’s ours. That said, credit cards probably aren’t for you if you have found that you can’t use them without going into debt. Make that choice for yourself.
2. Pay off your balance in full every month
According to a study by the American Bankers Association5, roughly 30% of credit card users are
transactors. These people use their cards regularly and always pay off their balance in full. This is the gold standard with credit cards. I’ve never paid interest on a credit card, I never plan to, and neither should you. This follow the church’s admonition to live within your means.
Of course, no one’s perfect. So don’t feel bad if you are carrying a balance on a credit card or you have in the past. Stuff happens, and I genuinely believe most of us are trying to do our best. So for now, commit to getting back to that gold standard, and do what needs to be done to get there.
3. If it’s necessary to go into debt, utilize 0% APR promotions
Saving up for big purchases is always the best-case scenario. But you may have situations where that’s not an option or it’s just not realistic. You should never make this decision on a whim or let emotion drive you. If, however, after much deliberation you decide to go into debt for a large purchase, plan ahead by getting a credit card with a 0% APR promotion.
We did this when we moved to Utah in 2015. We had gotten rid of most of our hand-me-down furniture to make the move easier and had no couches and no dining table for a few weeks. We applied for a credit card that offered 0% interest for 15 months and paid off the furniture within six. Could we have stuck with the old stuff or found cheap furniture on Craigslist? Sure. But I was going to earn a bonus from work in a few months and we were planning to buy furniture with it anyway. Why waste money on used stuff only to buy new stuff in a few months?
4. Get the best deal
Many people put the interest rate as their top priority. I know I did when I sought out my first credit card years ago. But if you always plan to pay off your credit card in full each month, the interest rate doesn’t matter.
Also keep in mind that the best deal for someone with excellent credit is different than the best deal for someone with poor or average credit. If you’re brand new to credit or have poor credit due to past mistakes, you might be stuck with a secured credit card (or a student credit card if you’re a student). Know your credit score and search for the best cards that are targeted to the range you’re in.
I like to recommend NerdWallet’s credit card tool to people looking for a new card. And that’s not just because I work for the company. The tool is easy to use and helps you narrow down your search based on your credit score, what kind of fees you want to avoid, payment network (Visa, MasterCard, etc.), and more. The company also has a chat feature so you can get help from a credit card expert (possibly me!) to find the right card.
O be wise; what can I say more?
Credit cards aren’t for everyone. If you don’t like them or have had trouble with them in the past, don’t use them. If you do use them or plan to, make sure you’re following these simple rules to stay out of debt and avoid paying interest.
In the end, personal finance is personal. We all have different experiences. We’re all adults here and should have the courage to be honest with ourselves, and to avoid judging others.
1. Wikipedia, “Demographics of Utah”
2. Value Penguin, “Average Credit Card Debt in America: 2016 Facts & Figures”
3. Marvin J. Ashton, “One for the Money”
4. NerdWallet, “Credit Card vs. Debit Card: Which is Safer Online?”
5. ABA, “Credit Card Market Monitor, December 2015“