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Question: Aren't there uses for credit cards that are considered positive uses? Like rebates and airline miles? No, this is a common myth. A truth would be that a responsible credit card use simply does not exist. Currently Americans are in serious Credit card debt, it has become a major problem in the United States.

There is NO positive side to credit card use. You will spend more if you use credit cards. Even by paying the bills on time, you are not beating the system! But most families don't pay on time. The average family today carries $8,000 in credit card debt according to the American Bankers' Association.

Now let's talk about the rebates. If you were using a credit card at 5%, you would have had to have spent $80,000 to get $4,000 rebates on new cars that lost $6,000 of value when you drove them off the lot. That is not a good deal!

Cash vs. Credit Cards

When you pay cash, you can "feel" the money leaving you. This is not true with credit cards. Flipping a credit card up on a counter registers nothing emotionally. If you use credit cards instead of cash you will spend 12-18% more. This is money you could have saved.

If you "have to" use plastic, I suggest a debit card. I use them for travel and the occasional convenience of ordering something over the Internet or phone. Other than that, I use cash.

Personal finance is 80% behavior. You need to cut out habits that make you spend more. You do not build wealth with credit cards. Use common sense. When you play with a multi-billion dollar industry and you think you're going to win at their game, you are naive. You cannot beat the credit card companies.

Charge and Debit Cards

Not all plastic cards are created equal.

When discussing the kind of credit that comes with a plastic card, the first distinction to make is between charge cards and credit cards. American Express Green Card and Gold Card and Diners Club Charge Card are charge cards that require you to pay your bill in full each billing cycle. Most credit cards (including some offered by companies that also issue charge cards) don't necessarily encourage you to pay your bill in full because they profit by charging interest -- lots of interest -- on the unpaid balance.

Charge cards. Travel and entertainment cards, such as American Express and Diners Club, are charge cards, not credit cards. You are expected to pay their bills in full within a specified time period. If you don't, you'll be penalized.

Membership fees for charge cards are higher than for bank-issued cards, and the kinds of service they offer -- an annual accounting of charges, traveler's checks, cash in an emergency -- are commonly available with credit cards, too, especially gold or platinum cards.

You may be able to get a bigger credit line with a charge card, but they're not as widely accepted as Visa or MasterCard.