One of my favorite financial blogs is J.D. Roth’s Get Rich Slowly. Last week, J.D. published a post asking his readers which credit cards they use, and how they use them. Always eager to share my two cents in the world of personal finance blogging, I started writing out a doctoral thesis on how I use credit cards, as well as how I use cash. About 500 words in, I realized I was giving J.D. way more information than he needed – and that the information I was giving him was fodder for a post right here!

Humble Beginnings

My parents taught me from a very young age that a credit card is a privilege, not a right. My dad’s first words of encouragement after dropping me off on campus for my freshman year of college were, “Don’t open a credit card account, even if they offer you a free hat.” Instead, my parents helped me build credit responsibly, taking out a credit card in my name. For more than a year, they kept that first card – an MBNA Visa sponsored by my college sorority – in their own wallets, using it only sparingly for their own purchases. At the start of my sophomore year, they handed the card over to me with as much pomp and circumstance as a royal coronation.

When they gave me the card, it only had a credit limit of $500. My parents received – and paid – the bills, so what I was allowed to buy with that card was still very much under their control. School-related expenses? Sure! An airline ticket to fly home for holiday break? Yup! A round of drinks for the guys in my favorite fraternity at the local bar? Unapproved, UNAPPROVED!

Over time, largely because my parents always made sure they paid the bill on time and were very restrictive about my purchases, MBNA increased my credit limit to $2,000. At this point, I’d graduated from college and was now living in New York state while attending graduate school. While my parents still paid my rent, I assumed responsibility of paying my credit card bill.

Building My Credit

Throughout graduate school, that original MBNA Visa card was the only thing in my wallet other than my debit card. I used my credit card sparingly; I was a strong believer that cash was king, and preferred to use cash – or at the very most, my debit card – for purchases whenever possible.

Time passed. I graduated with my master’s degree. I got married (technically, I got married first). I took on my first adult job. I moved states. I a new job and moved again.

It wasn’t until my husband and I went to apply for our first home loan that I really understood why my parents had been so finicky about my early credit card use. When the lender ran my credit report, he told me my credit score was 716. It was good, but not great. Then he ran my husband’s – 638. We were shocked. Why was it so low? What financial skeletons did my new spouse have hiding in his closet?

Turns out, there weren’t any skeletons: and that was the problem. His parents had given him a credit card while he was in college, just as mine had, but with one key difference. While my parents had taken out the card using my name and social security number, my husband’s parents had used their information. My husband’s name was on the card, sure, but it was his in name only; his responsible spending habits had been benefiting his parents all those years, not him.

We managed to get the home loan anyway – it was 2006, a time of easy spending and mortgages that weren’t worth the paper on which they were written – although we were burdened with a high interest rate of nearly seven percent. We’d learned our lesson, however, and immediately started applying for credit cards in my husband’s name. He had some issues finding a credit card company that would give him a card because of his low credit score, but ultimately found an American Express with a $1,500 credit limit.

What’s In My Wallet

Over the years, I’ve accrued a total of three credit cards:

  1. I still have that original MBNA Visa card. It now boasts a limit of $5,000, making me a certified platinum-level card holder. Technically, it’s no longer in my wallet; it’s not my go-to card, so my husband and I keep it locked up in a safe.
  2. A Home Depot credit card. This is the sole store credit card I have, and there’s a very specific reason why. In 2008, my husband and I chose to add a sunroom on to our home. We actually worked with a contractor through Home Depot (largely because of the insurance and warranty available through HD). The total cost of the addition was $18,000; instead of taking out a home equity loan or home equity line of credit, we took advantage of the Home Depot MasterCard’s 12-month no interest option. We paid the loan off in full nine months later, avoiding all interest charges, and haven’t used the card since. It’s credit limit has since been reduced to $8,000. It’s in the safe too.
  3. A Discover card. This is our main credit card, and it’s actually in my husband’s name (I have one in my wallet, but, like his original credit card, it’s mine in name only). We use this for all our purchases – everything from groceries and gas to paying the dog groomer and going on vacation. I even charged my hospital bill after giving birth to my son last year. Why? After a lot of research, I’ve found that Discover’s Cash Back Bonus program works best for our lifestyle. Last year alone, we earned nearly $300 in cash back; this year, because Discover upped the maximum amount of its quarterly categories, we’re on track to earn $400 or more. I’ll use that money to pay for my family’s Christmas gifts. The credit limit on this card is $2,500, although we rarely charge more than $900-$1,000 on it during any single billing cycle.

My husband and I have always been in the habit of paying off the cards in full every month. In fact, we usually pay them off before the bill even hits our email inbox. The reason, I guess you could say, is my OCD: I hate seeing the bill – even though it’s incorporated in my monthly budget – so I log on to my Discover card account weekly and pay the bill down in weekly increments. It’s unnecessary, for sure, but it also makes me more accountable to my budget.

Why Credit Works For Me

I realize that credit cards aren’t the right option for everyone. For many Americans, they simply don’t have enough willpower to say “no” to an impulse purchase when they don’t have to use cash. I have that impulse control; in fact, I’m more likely to avoid an impulse buy when I use credit cards than when I use cash. To me, cash is liquid – it’s an unexpected bonus, and if I’m carrying cash, I’ll spend it. Credit, on the other hand, it king – I’ve seen first hand what a low credit score can do, and I know that using credit wisely is the best way to avoid ever seeing a 638 on a credit report again.

Reader, how do you use credit cards? Head over to Get Rich Slowly and participate in J.D.’s unscientific survey!