My views on credit cards

[FixMyCredit1992]

Here is my opinion on credit cards from doing a few months of studying.

Credit cards are a great tool to have. For example:

In March you billed your entire expenses to your credit card. Only "needs" like Phone payment, sundries, etc.

In April, you lost your job, and you had $0 in savings ( a poor choice, but it can happen).

You could bill April's expenses and pay them off, giving you a 30 day grace period to find a job. This would not be an option for being without a credit card,and you could result in Charge off's if the bills are based on a contract. While this is risky practice, a credit card allows you to live today on tomorrows money in the even of the emergeny. However it is ALWAYS a good idea to have a safety net in place (savings account) to fall back on.

I recomend charging all your utlitly purchases if possible. If the utility company bills in error, this could result in a overdraft to your checking account if you used a debit card instead. 

One time I paid my dish network bill, and found my account negative over $500 dollars due to a billing error resulting in an extra 0 being added. While these errors are very rare, paying your utility bills with a credit card allow you to dispute the charge without hurting your checking account.

I personally like the "living today on tomorrows money" approach. Keep all your money in your checking (sending some to savings is a good idea, around 10-20% of pay). 

Then charge your purchases, and pay them in full when your next paycheck arrives along with your statment. 

It is much easier to dispute charges with a credit card company than it is with your bank. If you charge $200 for your power bill, you have at least 25 days to pay it, which is ample time for a dispute to resolve. 

Charging purchases also prevents your account from overdrafting, which can result in hefty fees.

In my opinion one should seek a credit card or mutliple credit cards with a total credit limit 10 times one's pay, then only charge 10% of your purchases evenly across the card(s), resulting in a low 10% utilization. 

Anyway, this is just my opinion from what I read, and limited knowledge, feel free to correct if wrong. 

[user5387]

CCs are certainly a useful financial tool, as you describe.

But many people abuse them, and get into really serious trouble.

Also, if you're going to go into debt, it's better to find some other means than a regular CC for carrying that debt.  In such a case, I'd recommend a low-rate CC or LOC from a CU.

[takeshi74]

There are any number of approaches to managing cards that can work.  It's really up to the individual to determine what works and what doesn't work for the individual using an understanding of one's finances, credit, credit scoring, goals, priorities, preference, etc.  You're not going to be able to devise a universal model that works best for everyone.

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@FixMyCredit1992 wrote:

In my opinion one should seek a credit card or mutliple credit cards with a total credit limit 10 times one's pay, then only charge 10% of your purchases evenly across the card(s), resulting in a low 10% utilization. 

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This is also a subjective matter.  What one should do all depends on one's specific goals and priorities.  Keeping utilization ~10% with a balance on one card and 0 on all others is recommended for those seeking to maximize their scores.  However, not everyone is seeking to do so.  For one thing, from a practical standpoint, managing one's utilization to optimize score is mostly beneficial when applying for new credit.  This is because your current utilization isn't affected by prior utilization.  Your utilization is based on whatever is currently on your report.  Personally, I let balances report on all of my cards but I'm not worried about squeezing out every possible point.  YMMV depending on your situation, goals, preferences, etc.

Credit limits of 10x pay just isn't realistic.  I'd have limits of over $1 million if that was possible.  I'd like to think that I'm responsible but I could really get myself into trouble with limits like that and never be able to pay off my debts.  10x is just far too much of a risk for creditors.  Many will run into the credit limit barrier well before 10X and probably closer to 2x or less.   10x credit card spend is more likely as not everything can be charged to a card but even that isn't necessary to manage reported utilization.  Payments can be made prior to statement close to manage reported utilization.  I'm lucky enough that I do have limits that are typically 10x my credit card spend so I really don't have to bother with micromanaging my reported utilization.