How to use credit cards

The closure of Chandler’s Office Supply in Evanston, Illinois, in 1995 was caused by the retirement of the owners along with competition from national chain stores.  The good news is that the store didn’t close because Northwestern University students defaulted on their Chandler’s credit card debt.

When I was a Northwestern freshman Chandler’s Office Supply gave me my first credit card.  They probably realized that students weren’t at risk of overspending at an office supply store.  My first year at Northwestern also saw First Bank Evanston give me my first checking account, and when I used the Chandler’s credit card I paid off the amount.  That became the start of my credit history.

Before I graduated from college I also accepted offers for gasoline and department store credit cards.  It’s possible for some people to overspend at a department store, although at mid-1980s gas prices the oil companies faced minimal risk of young adults spending more than they were able to pay.

In 1986 Sears introduced its Discover Card, and shortly afterward that was my next step in credit card acquisition.  Ironically, Sears turned me down for a credit card even though Discover accepted me.

A couple of the gasoline cards weren’t used after I returned to California.  There are no Conoco stations in California to my knowledge, and while my Amoco card was allegedly usable at Chevron stations few of them took it.  Eventually my Amoco card was converted into a MasterCard, which gave me my first “big two” credit card.  That allowed me to use the major credit card at bookstores and restaurants, although I had been doing that with the Discover Card.

Since I was paying off the charges, I didn’t consider using credit cards instead of cash to be overuse.  In fact, I was building up my positive credit history.  I was able to purchase my house without ever having bought a car on credit (to this day I’ve never owned a new car), so all those credit card purchases served a purpose even if I could have paid cash in some instances.

Thus my advice to young adults is to use credit cards wisely to build up a credit history and have the ability to make major purchases such as a house or a car.

My financial advice to college students also includes focusing on finding a spouse rather than on grades.  If I had dropped out of college and gotten married early when the right woman was available I wouldn’t have the three children I do now, so even if I could go back and do it over again I wouldn’t, but divorce can create some very adverse financial situations.  My marriage to a woman who wasn’t spending “her” money, the divorce and child support obligations, and the bankruptcy gave some Latin American governments better credit ratings than I had.  For six years I had no credit cards or checking account.

I thought not having credit cards or a checking account would be a handicap.  Instead it turned out to be an administrative advantage.  If I paid by credit card I’d have to come up with the money anyway, but if I paid by cash or money order that was the final transaction.  I didn’t have to deal with credit card statements or reconciling checking account balances.  Some spending sacrifice in other areas to allow me to pay in cash up front actually made things easier.

Ironically, even when I had gasoline credit cards I often made sure I had enough cash to pay the bill just in case the credit card didn’t work – although that was easier in the 1980s when I could fill my tank for $20.

I still had nothing to lose by applying for credit cards with no annual fee – in fact, having them reject me meant that I wouldn’t be inundated with repeat requests.  And if promotional booths were giving away items for applying for a credit card, I didn’t have to give those back if my application was rejected.  Eventually I began receiving credit cards again, although my preference for cash payments remained.  I consider it a bit of a victory when a couple of my credit cards were cancelled for non-use rather than for non-payment; I definitely don’t consider those cancellations to be losses.  I’ve probably also lost out on some rewards points, since using specific credit cards enough to accumulate sufficient points for redemption isn’t worth the personal administrative hassle.

Currently I use credit cards for one of two reasons.  The first is an emergency.  The second is when I’m out of town and I want to save my cash for places which don’t take credit cards, and the out-of-town expenditures also include hotel reservations which require a credit card for an advance deposit.  The rest of the time I still pay cash.

I thus recommend frequent use of credit cards for those who are building up credit and have the ability to pay off what they spend through plastic.  I also recommend credit cards for emergencies and for out-of-town travel.  In other situations, however, cash is not only a precaution against overspending but is also the easiest type of payment.

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