When is it Okay to Use a Credit Card?

A few months ago, I wrote about how to stop buying on impulse. Using a decision tree like the one in that post can help you think before you spend, simply by reminding you to ask yourself important questions like “Do I already own something that does the same thing?” or “Will I have to hide this purchase from my spouse?”

For me, using decision trees has been very helpful, not just for impulse spending but for other life decisions as well. One question I’ve found myself asking a lot lately is, “Should I put this purchase on my credit card?” Rather than waste time agonizing in the checkout line (and pissing off everyone behind me), I thought I’d make a decision tree to help me make that choice as well.

Should I Use a Credit Card?

Here are the criteria I used to make my decision tree:

1. Is this a real emergency? We all say we have a credit card (or two, or ten) for emergencies, but it’s funny how anything can become an emergency if you want to buy it badly enough. So my first question is simple: Is this truly an emergency situation?

  • YES: Will someone die if I don’t use the card? If a doctor says, “We need a thousand dollars or your son won’t survive,” you can bet I’ll be swiping as fast as I can. No brainer. If not, I’m moving to the next question.
  • NO: Is it still very important? If not, I’m putting the card away. If so, I’m moving to the next question.

2. Will I starve or lose my home/car if I don’t use the card? Food, shelter, and transportation are basic needs. In an ideal world, no one would need to use a credit card to meet those needs. But since I’ve been there before, I’m not going to rule out the possibility that I could end up there again.

  • YES: If so, I’m using the card. The end.
  • NO: I’m moving to the next question.

3. Will I be able to pay off the balance when the bill comes? Let’s say something isn’t a life-or-death emergency, and it doesn’t involve meeting basic needs, but it’s still important enough that I haven’t given up yet. My next concern is whether I can pay off my balance without paying interest.

  • YES: I’m moving on to the next question.
  • NO: I’m putting the card away. If it’s not life or death, not a basic need, and I can’t pay it off within a month, I can’t afford it. Plain and simple.

4. Can I pay for this item with cash instead? For a long time, using a credit card was a habit for me because I didn’t keep up with my money. I would use the credit card, THEN go home and see if I had enough in the bank. That’s a backward way of thinking. Instead, I need to know the answer to that question before I buy anything.

  • YES: I’m putting the card away and using my debit card or cash.
  • NO: I’m moving to the next question.

5. Why not? If I can pay off the card when the bill comes, yet I’m not able to pay for the item in cash, I want to know the reason why. This is a safeguard question for me, to make sure my shopaholic brain isn’t telling me lies and helping me justify an unnecessary purchase.

  • I don’t have that much money and probably won’t in the near future. Sometimes I tell myself, “Oh, I’m sure I can pay that off, as long as I sell stuff on eBay and get X amount for my birthday and Mars aligns with Saturn!” If I’m counting on money I don’t know I’m getting FOR A FACT, I know this is not a good time to use a credit card. I’m putting the card away.
  • It’s between paydays, it’s an unexpected expense, etc. If I get a flat tire on Tuesday and I’m getting paid on Friday, I can justify using a credit card. (Ideally my emergency fund would cover something like that, but I’ll be honest - it’s running kind of low at the moment.) Or maybe I have money in my Paypal account but it will take 3 days to transfer to my checking account. So it’s entirely possible that I’ll have the money to pay off the credit card, but I might not have it right this second. In that case, I’d use the card.

The Decision Tree

If you’d like to use this decision tree for yourself, you can click the image below to make it bigger, or you can download a PDF to save and/or print.

One More Consideration

When it comes to credit cards, one final question I always ask myself is this:

What would I do in this situation if my credit cards were maxed out or I didn’t have a credit card?

If I would be willing to borrow money, pawn something, or sell a body part, it’s likely that the purchase really is a need. If not, it’s probably a want that’s disguising itself as a need.

For example, last summer my son became addicted to online games, and we only had one computer in the house. I decided that getting a second computer was important, mainly to keep us from strangling each other (but it wasn’t an emergency or a basic need). However, I couldn’t pay off the cost of a new computer by the following month. When I asked myself what I would do if I didn’t have access to credit, my answer was, I’d wait until I had the money saved up.

So I waited until I had enough money to buy another computer. It actually didn’t take too long, especially since I was throwing every dollar I could toward that savings goal. (It’s amazing what you’ll do when you have a whiny teenager driving you crazy!)

What About You?

How do you decide whether or not to use a credit card for purchases? Are you adding to existing credit card debt? How could a decision tree help you avoid that gross feeling of regret?


When is it Okay to Use a Credit Card?34 Comments

  1. Thankfully- no credit card debt. Crazy thing is- even when I have the money set aside for something, I still feel guilty when I actually buy it on the card. I've paid the credit card the next day and it doesn't help. Weird, huh?

    That nagging feeling the money should stay in savings, be put in the emergency fund or used for some other better (although undefined) purpose won't go away.

    • It may be annoying, but it's probably a REALLY good thing that you have guilt nagging at you! Definitely a better problem to have than the alternative.

  2. I use credit cards purely to ease cash flow during the month and for the rewards. I'm honestly terrified of carrying a balance (which is why I have yet to do so). In order for me to be willing to carry a balance, the purchase would have to be something life-threatening I think.

    • I guess I've never had a credit card with cool enough rewards to understand why people get so excited about them. Do you really get amazing rewards? Of course, I realize that all people don't have the spending history that I do, so it's not a big deal for them. But still - if I ever got addicted to earning rewards, I'd probably never stop!

  3. I use my credit card for everything to get the rewards points. I just make sure it is paid off each month.

  4. That is a really good process for you.

    For me- cash disappears into thin air. I just don't know where it goes. I use a credit card for everything, because I can see a record. So my process is "Do I have the money to pay for this now?" If the answer is yes, it goes on the credit card.

    If the answer is no, I start putting money into my purchase savings account until the answer is yes, and then it goes on the credit card.

    The rewards points are nice :)
    (I use my debit card for the first small 12 purchases my husband or I make each month because that is how our bank account earns interest. But then we get no rewards, so I stop using it.)

    • I'm with you. I use a credit card all the time because of the record and because of the points. I never carry a balance though, so any large purchase where I'm not 100% sure I can afford, I have to double check. I hardly ever carry cash.

      That might only be good be for people with income much higher than monthly expenses. I can totally see having to monitor much more closely if my monthly income equaled my monthly expense budget, then you wouldn't have room to make a mistake without triggering catastophic interest expenses.

      • I just prefer to use my debit card, personally. Of course, for me, it's too tempting to go over my expenses and think "I can pay this off later." I know a lot of people have way more control than I do!

    • I never use cash for the same reason, but that's why I use my debit card for everything. Plus I do get reward points on my debit card. What kind of rewards does your credit card offer?

  5. The nerd in me loves that decision tree!

    Personally if a place takes a credit card I use it. I am lucky to be debt free and pay my cc off every month. I get enough reward point this way I can travel for very little extra cash.

    • I'm always very interested in the whole reward points thing. My debit card offers reward points, but they really don't amount to anything to get excited about. I'm guessing maybe credit cards are vastly different? I get a point per dollar spent; double points for anything from a gas station, pharmacy, or grocery store; and points-per-dollar plus 25 points every time I pay something through online bill pay.

  6. I am a cardholder on my husband's credit card. I feel I'm still in a sensitive zone since paying off all of my debt recently (I had the massive debt, my husband has zero debt). I haven't felt comfortable enough just yet to have my own credit card - since we share the card and the statement, I feel I am held responsible for my purchases. When I do get my own card, I will print off the Credit Card Tree and tape it to my credit card!

    I think your credit card tree is important for people who are not necessarily great with credit. There are plenty of people who can make several purchases every month using their credit card, but they are also able to pay the full balance when they receive their statement. Some of us are flat out bad with credit and all the credit card points won't save us from ourselves. Some of us can be reformed by restricting our credit usage to emergencies or special occasions only.

    • I totally agree. Because of my history, I'm scared to death to use credit cards. I've used them several times since I paid them all off last summer, but only in very controlled circumstances. If I started using one all the time, I really think it would just be a slippery slope. I'm glad there are people who can handle it, but I know myself better than that!

  7. I ONLY use my credit card now when I have the funds to cover the bill. I never carry a balance, so absolutely no paying interest! I use the card because my husband and kids love Disneyland and this card has rewards points attached to it that allow me to use for food or items at the park. Since I use it to buy things I was planning to buy anyway, it's an added bonus for the family and for me not to drop the cash on the pricey food at the amusement park.

    • That's a pretty good reward if you like Disney! For me that would be a nightmare - my son is autistic and does NOT do well with theme parks. I'm always interested in the types of rewards people earn and how much they have to spend to get them.

  8. We're one of those "only in emergencies" families, but unfortunately the past two years have been full of emergencies and so we're carrying balances right now. I hate that. But vet bills, car repairs, dead appliances, etc. just kept coming one right after the other and I'm very glad we had the credit cards to handle it all. I really like the question you ask yourself: "What would I do in this situation if my credit cards were maxed out or I didnt have a credit card?" Often, the answer would be, "Do without this item." That puts things in perspective. (But for emergencies, no-just do whatever it takes.)

    • I know that feeling all too well! When it rains, it pours, especially at my house! The longer I go without a major catastrophe, the worse I know it's going to be when something DOES break. Because then it will be one thing in a series of things. I've just worked on my emergency fund to minimize the chances of using a credit card, and so far that has worked out pretty well. Always something, though!

  9. Do you seriusly do that decision tree every time you're gonna purchase something with plastic? Man, my wife is in charge of the credit cards, so I don't really have to think muich about it!

    • Not when I use my debit card, but for a credit card? Hell yes I do it every time! Obviously you and your wife are better with CCs than I have been in the past.

  10. I love that decision tree!!!!!! That is how I think when I am debating on using one of my emergency credit cards. Otherwise, for my other 2 - I only use them for my day to day expenses. Kind of how my checking account works. I make sure to check it everyday and then I pay it off every time I get paid so that I don't carry a balance over. I use it for the rewards.

  11. The decision tree is very cool, no doubt.

    One thing we started trying recently is buying groceries on a rewards card that pays 5% cash back, and then paying the bill as SOON as I get home, without waiting at all.

    So far so good.. We get the benefit without the interest.

    • That's what I've typically done when I've used a credit card since I paid off all my balances. The end of the month is too far away and too much could go wrong by then!

  12. I pay 90 percent on my card. I ALWAYS pay the balance. I build points and save money and only buy what we need. I would use the card 100% of the time but sometimes you just need cash.

    • More power to you if you can pay it off every month! I got into a ton of trouble with credit cards, not once but twice, so I'm terrified of them.

  13. The only time I've ever had credit card debt is when I was going through a divorce; had to pay the lawyer with plastic. When I finally paid it off I did virtual handsprings and vowed never to have debt again.
    Now, as noted above, I charge many items for the rewards points and use the gift cards for presents or for things I want/need. Recently paid for my ticket to the Metropolitan Opera movie-theater broadcast of "Gotterdammerung" with one of those cards.
    Recently had to pay almost $2,000 for my share of surgery costs. As I gave the HMO my credit card number I consoled myself with the fact that (a) thank goodness I wasn't making payment arrangements for the full $10,000-plus and (b) 2,000 points are almost enough for another gift card. I can tell you right now that for Christmas a lot of folks are getting either gift cards or something that I buy using a gift card.
    Other than that? I won't charge anything I can't pay in full.

    • So it's a point per dollar? That's what I get with my debit card, other than a few exceptions where I get double points. That relieves me - I'm glad to know I'm not missing out on some amazing deal.

  14. I put everything on my credit card, even down to purchases under $10 for two reasons: one, air miles (I use them to fly back and visit my family), two, at the end of the month I have a handy list of everything I've spent. I do spending reports, but it's hard to remember how much cash I spent (I only allow myself $40 a paycheque in cash for coffee purchases) if I don't have it sitting right in front of me on a statement. Granted, I do spending reports to try and capture all of my spending, but the credit card statements help too (and I've never carried a balance - I have a mental cap in my head of my current balance and how much I'm allowed to spend over the course of a month).

    • Okay, I think you're the third person to mention having a record of what you spent so I have to ask - doesn't your bank provide the same thing? I'm really confused about why a debit card wouldn't work (rewards aside). Am I missing something??

      • Oh, yeah a debit card would work for sure! It's just that I don't get any rewards with debit, and it's just another account to go look at to fill in the gaps in my spending (I am super lazy). I could just as easily use debit for the same things I use cash for, but I cannot live without having cash in my wallet for some reason. Does that make sense? It's late and I'm not usually up at this hour. Basically, I try to put everything on my credit cardsso I have rewards and don't have to log in to another account to look at my spending.

  15. I use a credit card for every single last purchase if it's available. Since, I live by a written budget, credit card are actually safer and more convenient than cash. I admit this take some serious discipline, so those who are impulse spenders or don't have any wiggle room in their budget if they mess up shouldn't use my method.


    45 day grace period
    extended warranties
    concierge service
    REWARD POINTS or cash back

    Pro tip: Follow your budget and always pay in full. 0 interest charged.

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