Parents tell son he will create credit card debt with rewards cards

credit card debtCREDIT CARD BUDGET SAVINGS

 

I talk about credit card debt on CBB once in a while and I also talk about how credit cards can easily be your friend if you use them properly.

Many people use credit cards today rather than carrying cash with them. It’s simple to tap, swipe or insert and enter a pin to pay for a purchase and in most cases it gets you through the checkout faster.

We carry credit cards because of ease of use and of course there are perks to using Canadian Credit Cards if you use them wisely. Credit cards have helped many people get back on their feet because they knew money was on the way.

One friend of ours was in between jobs and used the credit card to get grocery rewards which helped them to buy more groceries for the family every month. One of our current rewards cards the SDM Optimum has almost 500,000 rewards points which is equal to about $1000 worth of free product. We don’t own the Optimum credit card but if you did you could get even more Optimum points faster.

 

Credit card debt

 

How to pay off credit card debt?

Easy, don’t build it in the first place but if you do have credit card debt then pay off the cards with the smallest amounts first and apply that money to the next highest credit card plus the minimum balance you would pay at the same time.

Smash the cards first with the lowest remaining balance then move on down the line while paying the minimum on the others you own. It’s a snowball effect of sorts for those who simply have debt that is out of control.

Yes you will pay more in interest over time but it’s been said that those people who are in debt will be more successful in paying off the smaller amounts first rather than the credit cards with the higher interest rates which for most would seem logical in nature.

Higher interest rates means it costs you more money but for those in debt it’s hard to see the light at the end of the tunnel so they may give up before they begin. Dave Ramsey uses the snowball effect with his readers and it works for many. It’s up to you what way you want to tackle your debt depending on how well you view the long-term goal of the debt-repayment.

Personally, I’d go the highest interest rate first but that’s because I can see the end goal but again, that’s personal. Paying just the minimum amount on a credit card might take you many years and cost you more so be mindful of your finances.

Not all credit cards are evil in fact I own a few credit cards which I just love and use them every day for even the simplest of purchases. Credit card companies do reward their customers with some fancy perks just for joining with them so if you want rewards find a credit card that suits your needs.

Today we have a fan who feels he has found a credit card that works for him but it’s his parents who want him to cut it up and cancel it because they fear he will mis-use it.

Some parents really don’t want to step in to bail out their kids every time they can’t pay their bills so they try to scare them into believing they aren’t good enough to take care of their finances. I can understand not wanting to see your children in debt but using scare tactics really isn’t the proper educational tool to understand proper finances.

There comes a point though when kids become adults and they have to deal with their own money even if that means they fall flat on their faces to learn a hard lesson.

It’s not what parents want but you can’t control every aspect of someone’s financial future, it’s up to them although you can guide them or offer tips.

Dear Mr.CBB

I think my parents are being unreasonable since I’m a grown adult in my twenties asking me to get rid of my credit card for fear I will accumulate credit card debt.

Both my parents are hard-core into saving money and budgeting and this is how I found your blog because they told me I should read it because I could learn how to budget my money better.

I’ll agree with my parents that I didn’t use a budget but rather spent using a frugal mindset (even though they don’t believe me) and I did download your free budget and used it in July and most of August and all seems to be going well.

When I went to University I was one of those students who signed up for a credit card because I thought I needed one. I didn’t. Even though I worked my way through school and saved money so I wouldn’t have any debt like you Mr.CBB I did end up having a large credit card bill that my parents helped me to pay before it went into collections.

I wasn’t the smartest with my money back then but I’ve changed and I want my parents to understand that I am able to use a credit card responsibly especially now that I understand the perks of owning a credit card with a rewards program.

I use my credit card now to get rewards points so I can use them towards whatever I need such as groceries, tools and even flights when my friends and I want to jet off on holiday. I have a steady full-time job and currently have no debt but want to save up to buy my first home soon.

How do I get my parents off my back and do you use a credit card for rewards as well?

P.S they read your blog but I want them to know that I can do this on my own even though I appreciate their love and support I have a changed mindset with my personal finances. It’s just harder to say in person sometimes.

-Craig

Dear Craig,

Well, that was an unexpected email but thanks for sending it my way because without fan questions I really don’t know what my readers want to learn about.

My parents were big time into finance as well when I was young and still are today. I learned from a young age about money and my first job was a paper boy.

Money has always been important to me because I didn’t want to go into debt, in fact I was afraid of debt. I didn’t own a credit card for a long time and when I did it was mainly for travelling as I was a huge traveler when I lived in the UK.

I wanted to reap the rewards of travel points any way I could and that was one way that I was able to spend less to get more from my vacations. I’ve been to Thailand, Iceland, India, Portugal and countless other hot vacation spots and most often I used my frugal ways to get me there.

Now that my wife and I have a baby on the way and I now live in Canada we have thought about our first trip back to the UK to visit family. It’s an exciting time for everyone but it can also be costly to have all of our relatives visit Canada from the UK so since we haven’t been home for 7 years we want to start planning now.

Even though we have our mortgage paid in full you might think that it should be a breeze to pay for flights but it’s not that easy. We still have bills to pay as well as plenty of renovations that are costing us quite a bit of money not to mention baby expenses around the corner. Just because you have no debt doesn’t mean you don’t have to save for what you want.

I know you are thinking we could easily use Skype to see the family and believe me we will be doing that but my parents don’t even own a computer. I’ve tried to motivate them to buy one but they have no interest in learning how to use this new to them technology even though the basics are pretty simple.

Typically when my wife and I would fly we would always source out the cheapest flights and run with it even if that meant we had to take on connecting flights.

Travelling with a baby will be challenging but it’s been done many times although we want to know what we can do to make sure our baby and for our own sanity the trip is comfortable. This means we will likely be watching for flights on airlines such as Air Canada rather than economy flights through value operators.

 

Credit card rewards

 

I’ve never booked through a travel agency before either so I’m still going to do my research online trying to score a great deal but in the meantime I’m hoping to put our credit card rewards to work for us.

The key is to find the rewards card that best fits you. If you are super at budgeting your money and don’t want to accumulate debt you know that you have to pay your bills in full every month. Sure using a credit card can be scary for some people but if you are responsible with your money the credit card can be a great asset to your wallet and budget.

Having a reward card for example such as an Aeroplan Canada credit card allows travelers to collect Aeroplan points to use towards upcoming flights along with many other cool perks. The best part is you get double the Aeroplan points when you use the credit card along with the Aeroplan membership card when making purchases which we also use at retailers in our local area such as Home Hardware.

Some people look at rewards cards as a waste of time but for this frugal family we have saved so much money collecting rewards points from health and beauty to tools for around the house.

One of our Canadian Budget Binder fans collects SPG rewards points towards hotel stays around Canada when she travels and I can’t get over the perks she gets. Just recently she used her points to enjoy holidays and even though she had some concerns with her stay she was even refunded some of her points.

It was nice to see that the hotel wanted to make her stay right and by offering her back a percentage of the points she worked so hard collecting with her points card felt worthwhile. It’s important to find the rewards program that suits your needs.

We use our credit cards all the time to collect points rather than carrying cash with us when we shop. Sure we might carry a small amount of pocket-money but our main source for purchases are made with the credit card. So now that we know that we want to travel to the UK we will use our credit card rewards program points to save.

I think your parents are just looking out for your well-being and although it seems difficult to talk to them in person it’s important to let them know that you will be fine.

I’m pretty sure they want that assurance that you are on better grounds with your finances now compared to when you were a student and maybe share with them the reasons why a credit card is important to you and even more so, the budget.

I hope that helps a bit and happy shopping and saving of your rewards points!

-Mr.CBB

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Mr. CBB
I’m from the UK and now a recent permanent resident in Canada. I bought my first house at the age of 21 after University then my second at the age of 24. I’ve always been fascinated with personal finance, savings, learning to make money and watch it grow while combating debts along the way. Canadian Budget Binder is a place where I get to share my experiences with personal finance and learn about yours along the way. I hope you stick around and check me out on Twitter, Facebook and Pinterest where I am active on all social media sites. Cheers, Mr.CBB
Mr. CBB
Mr. CBB

Comments

  1. I don’t think students should get a credit card – I blogged about this a couple of days ago . It’s like giving an 8 year old a box of fireworks. Sure they could be careful with them, but what’s the odds?

    But I am also into hard-core money management. Card are great for rewards and for your credit rating and do no harm at all to your finances if you pay them off in full each month. Perhaps your reader shouldn’t be trying to just get his parents off his back but to convert them to see the error of their ways? :)

  2. I am paying off my credit cards but it’s a hard struggle so I understand his parents concerns. I just finished helping my daughter pay off her credit card since she doesn’t have a job. I have no concerns about having credit cards, usually I only stick to one credit card though, which I will be going back to once they are paid off. I don’t having more than one as it’s too hard to up with and too much of a temptation. One of the credit cards does have some rewards (but no annual fee :)) and it’s the double edge sword as it’s the lowest amount but the highest interest rate.

    Craig,
    You mentioned that you have been using Mr. CBB’s online budget spreadsheet for the past couple of months, you may just need to sit down with your parents and actually show them how your budget is set-up and if you recorded the actual values spent, show them that as well. By “physical” proof, they may finally understand and “get off your back” about your credit card. As parents, we have a very hard time letting go and allow our children grow up and by independent because you will always be their baby.

  3. Great answer, Mr. CBB. I agree: Craig, show them your budget/spreadsheets. Your parents are simply worried about you, which is great, is it not? Give them the peace of mind that you really are responsible with your cash, and be careful with those reward cards: they can be risky.

  4. I think what you need to do is prove to your parents how responsible you can be with your credit card. Show them your monthly statement and that you are only purchasing things that you would normally be purchasing anyway and that are in your budget. Of course, you need to make some fun purchases, but you aren’t going overboard.

    Also show them how the rewards are adding up and what you can get with those rewards. If that doesn’t convince them, then nothing will.

    Also, I think kids should be introduced to credit cards at a young age making it clear that you have to pay them back immediately or at the end of the month. Teaching them responsible use early will make sure they don’t go crazy with it when they go off on their own in university. I believe I had my first credit card at 16 and I’ve never carried a balance.

  5. I can’t really blame credit cards for the credit card debt I accumulated throughout the years. I can only blame myself and my lack of understanding how they should be used. I don’t think students should have credit cards unless they can prove that they are responsible. One way of doing this is by getting them a secured credit card and see track their spending habits.

  6. Christine Weadick says:

    I agree with the above posts in that this person needs to show his parents what he is using the card for and how well he is paying it back as well as how he is doing with his budget….I would think a few months of doing this should show his parents that he has learned his lesson on credit cards and is capable of handling the card. Mind you once he does that and manages to get his parents onside he better continue to watch the balance on it and his budget or he may never hear the end of it!!!
    We have an Air Miles M/C and collect the air miles but they have discontinued a lot of the gift cards I used to get with my miles so it is losing it’s ability to impress me……. If I decided to get a different card I would consider keeping the M/C but dropping the limit on it and then using it for online purchases only. I do have a few points cards with different merchants, including the SDM optimum card but I don’t have anywhere near the points you do!!!!!!! I seldom see the ad for SDM so I don’t have a reason to shop there much.

  7. When I first got my credit card, I was extremely excited about the reward program and getting to get certain items for free. I even got it in my mind that I should spend more since I was getting free items from the points I was obtaining. This is such a horrible mindset though and I finally learned my lesson the hard way when I was younger.

  8. Such a good advice Mr. CBB! I remember before, my parents always told me that I should never use a credit card because it’s not ideal from the word “Credit”. :) But actually it’s not bad after all, it has many advantages, especially your credit score and rewards, just make sure to be very responsible.

  9. I am just getting to my larger credit card debts, and I am finding it harder and harder to find the motivation to pay them off. The smaller cards were much easier.

    • There you go a good example of how motivating it can be to get rid of the small debts but the larger debts seem scarier. Don’t worry keep pounding away at them and they will be gone before you know it Michelle!

    • There you go a good example of how motivating it can be to get rid of the small debts but the larger debts seem scarier. Don’t worry keep pounding away at them and they will be gone before you know it Michelle!

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