Tuesday, December 27, 2011

Financial Advice from a Laydee: Credit Cards and the Ethical Use Thereof

Hey, everyone, hope the holidays are treating you well. It's that time of year where we reflect and make resolutions and decompress, so, if you'll allow me, I shall continue with the money talk. Getting your money in order does a great deal for stress-reduction. Finance is self-care, y'all.

So, credit cards. They are capable of both great good and great evil ...


  • Credit cards are great for online purchases, because they have fraud protection. Are you using debit cards to buy things online? STOP IT. PayPal? They're the devil. In 12 years I've had fraudulent purchases made on my card twice, and in both instances my credit card company [A.] noticed it before I did and [B.] held me liable for none of it.

    I think they're also a better choice than debit cards for gas stations, because gas stations are notoriously rife with skimmers.

A skimmer
  • If you have a credit card, you should check out what protections you get from it. For instance, extra insurance on rental cars is pretty common. Some cards give you a few months' warranty on any expensive electronics you buy with them.

  • They can help you build a credit history, if that's important to you. There are other ways to live, but not having a decent credit history can limit your ability to borrow money or find an apartment to rent.

    If your credit history is bad or nonexistent, you can get a secured credit card. They're not so much "credit" because you give them money up front to hold. But if you demonstrate that you can use it within the company's parameters, then they'll eventually upgrade you to the usual type of credit card. A friend of mine used this approach when she moved to another country where her American credit rating had no clout.


  • Credit cards redistribute wealth from poor to wealthy. How? Every time you pay with a credit card, the seller has to pay a fee to your credit card company. The seller can't pass that fee along to you because their agreement with the credit card company expressly prohibits it. Folk with good credit (who are usually comparatively well-off) qualify for special rewards or cash back from their credit cards, which is funded from those fees everyone pays. It's like the opposite of how taxes should work in that we all pay more so that the least broke among us can pocket extra cash.

    It's hard to avoid credit cards for a lot of purchases, like plane flights or computers, but when it comes to things like groceries I try to pay with cash. It's a simple way for me to help keep food cheap for everyone. Another approach (one that applies more to gas than groceries) is to look for vendors who offer a cash discount, since that's one way around the prohibition against vendor-applied fees.

    It shocks me how many otherwise ethically-minded folk neglect this effect and advocate using a credit card for absolutely everything in order to rack up rewards.

  • What, not old enough for this?
  • Credit cards can be really, really bad for you if they're not compatible with your spending habits. I don't know whether they increase debt, but the average credit card debt in this country is something like $6k. J.D. Roth of Get Rich Slowly cut up his credit cards as a key part of getting out of debt, and recommends that others do the same.

Overall, it's like you have a tiny greedy bank CEO (or Viking, I guess that works, too) in your wallet, protecting you from fraud. That's a weird metaphor, but my point is that it's not always obvious how to use credit cards ethically. I've got a bit of a compromise going on ...


  • I try to use cash for most everything I can, especially groceries, medicine, household necessaries, and utilities (well, I use bill-pay for the latter). This dovetails nicely with my budgeting method, wherein I withdraw a set amount of cash weekly. Win-win.

  • I use my card for car rentals, online shopping, tickets, hotel rooms, and big cost items where I need the fraud protection and/or warranties and insurance.

Next topic will be debt reduction, I think, but I'm totally open to suggestion for ethical/feminist finance topics.


  1. Credit Cards can make you and break you, especially as they are so tied to credit scores. In prepping for a move to North Carolina, my wife called Bank of America to get a credit line increase, just in case. Her line at the time was 20,000 dollars. She had 9,000 on the card, plenty of credit, but you never know what can happen. So anyway, she called them, and in ten minutes her request for an increase became utter confusion when they said that they were going to cut her credit line in half instead.
    This killed her credit score, as it now looked like she ran up the card, and made getting a mortgage for the new house tough, since we could only use my salary and credit score.
    The kicker? No reason was given for the credit line reduction, and of course, reading the fine print, they do not have too.

  2. Wow, what a sitch. Sorry that happened to her :(

    Do you mind me asking when this happened? Since the crash it seems like negotiating with your credit card company can trigger an "Oh, here's a customer whose credit we forgot to slash/rate we forgot to raise." Which, of course, hurts people when they need more credit to get through uncertain times :\

  3. Yeah, it actually happened in late August. Right before I left for my own new job this year. It was rather rage inducing.