The Ten Commandments of Credit Cards

The creditor hath a better memory than the debtor.
— James Howell

There are those who claim that credit cards are a pure, unadulterated evil. No matter how iron-clad your personal discipline and willpower may be, these people claim, it doesn’t matter. It is simply impossible to use credit cards responsibly.

My response: Horse Hockey.

A credit card is a tool. Like any other tool, credit cards can be used or abused. While it is true that abuse is rampant, that doesn’t mean it’s impossible to use them well. Like it or not, the system works the way it works, and having a good credit rating is useful when it comes time to purchase a house or finance a business venture. Responsible credit card use is the only way I know of to build a solid credit history without ever actually having to pay any interest.

I do have some sympathy for Dave Ramsey’s position on this. While I may disagree with his black-and-white thinking on this point, Dave speaks to a broad audience, and it is true that the overwhelming majority of people would be better off avoiding credit cards entirely. There’s no doubt in my mind that if everyone did this, the world would be a better place.

Furthermore, I have no doubt that there is truth to the studies showing that most people tend to spend more when using credit cards than when using cash.

I’m equally sure, however, that I am not “most people,” and neither are you. As is so often the case, the truth is more nuanced than the talking points you’ll hear from the Suze Ormans and Dave Ramseys of the world. In short, it is possible to use credit cards to your benefit. You can start by faithfully abiding by the following commandments:

I. Thou shalt pay off thy balance in full every month, on time, preferably through automatic debit.
Paying off in full every month means you won’t be charged any interest. You’re basically getting a 30-day loan from the bank for free, plus any rewards you may have earned. You also get better fraud protection than debit cards, and it’s much easier to track credit card purchases over time than when using cash. This is how you game the system — but only if you keep your discipline.

II. Thou shalt make no exceptions to commandment I, ever — unless thou dost really and truly — no, not even then. Never. Really. Never.
You know that really obvious extreme example of an exception you thought of when reading this? Not then, either. Find another way.

III. Thou shalt not pay an annual fee.
Some may suggest that paying an annual fee is rational if the rewards program is so good that you’ll more than make up the difference. To me, that smells like an incentive (or excuse) to spend more, which is the last thing anyone needs.

IV. Thou shalt never allow thy credit card balance to exceed thy bank account balance.
Yes, I know the credit card bill doesn’t come until the end of the month, and you’re going to get paid on the 15th. This is still a good rule to follow, as it keeps your credit card spending linked in your mind to your cash on hand.

V. Thou shalt read and understand every last word of fine print in thy credit agreement.
Beware — here there be dragons. Credit card agreements are infamous for being full of traps for the unwary. Best hunt them out up front before an issue arises. And don’t just skim over legal mumbo-jumbo that you don’t understand. If an unfamiliar term like two-cycle method catches your eye, look it up.

This includes any addenda your provider may send you in the mail for existing accounts, by the way.

VI. Thou shalt sign up at, and track all of thy purchases.
You can substitute a different tracking tool if you want, so long as you track every single penny of your spending.

VII. Thou shalt review thy purchase history frequently, and guard against identity theft.
Read through your purchases monthly at a minimum. (Mint makes it easy to do this for all of your accounts at once.) Keep a close lookout for fraudulent transactions, and ensure your purchases are properly categorized. This will help later on, when you want to research your spending habits over time.

VIII. Thou shalt check thy credit report yearly, and correct any errors thou dost find.
For better or worse, your credit rating affects everything from mortgage rates to your job prospects. You had best review yours regularly, and closely, because 4 out of 5 credit reports have errors. Scary, but true.

Be sure to go to the right place to pull your reports, too. is the only official site to get your free annual credit reports from all three major agencies. 99% of the other sites advertising “free credit reports” are scams. Here’s an easy test: If you must use your credit card to get your “free” credit report, you are being scammed.

IX. Thou shalt choose a rewards program that dost not encourage further spending.
Skip the frequent flier miles programs, and various other “points” schemes that only encourage further consumption. Prefer cash rewards that are applied directly to your bill, or direct-deposited in a bank or brokerage account.

X. If thou canst not in good faith follow commandments I through IX, thou shalt not carry a credit card.
Be honest with yourself. If you can’t keep your discipline, then Dave Ramsey may have been right about you, after all. Better not to use a credit card at all if there’s any risk of misuse. Don’t feel too bad — you’re far from alone in this regard. But you’d be well advised to cut up any cards you may have, lest you succumb to temptation.


  1. Travelled all around the world (even the USA) and never owned or needed one. Still don’t get what all the hype is about regarding them…

    • Sean Owen

      It may be different in the U.S. than other countries. Some of the benefits are (in no particular order):

      1) Rewards programs – They amount to getting a discount on everything.

      2) Fraud protection – There is a whole layer of consumer protections for credit card transactions not available when using cash or even debit, and not just against identity theft. If a vendor screws you over, for example, it’s much easier to reverse the charges on a credit card than to try to get cash back.

      3) Safety – carrying cards is safer than carrying cash around.

      4) Tracking – No need to track all purchases manually, it can all be automated with Mint.

      5) Convenience – this is a double-edged sword, of course

      6) Ubiquity – Many places don’t accept cash or checks but do accept credit cards.

      7) Build your credit rating without paying interest. (Just pay off your balance every month)

      I don’t know how credit ratings work in other countries, but #7 is a big one in the U.S. A solid credit rating is a big deal, even if you don’t intend to carry debt. Employers look at it. Landlords, too. And of course the banks that issue mortgages rely on it heavily. A frugal person who pays cash for cars and doesn’t rack up unnecessary debt has few other options to build their credit history.

      I think it’s silly that someone smart enough never to rack up debt ends up with a bad credit score, but that’s just how it works, here. I’m all for fighting to change the system, but we have to live in it in the meantime, so it’s best to learn to work the system, too.

      I know many of the other benefits also apply to debit cards. But banks often require a good credit score to issue those, so we’re back to #7.

    • Hey MTM,

      That’s hard-core and you’ve earned the same respect from me that I normally reserve for those who skip cell phones.


  2. Great review, Sean….

    That said, a confession: Just last year I violated Commandment #III for the first time ever.

    I did this with great deliberation and to secure a card I could use overseas without the odious 3% fees tacked on to each purchase. A quick run of the arithmetic showed those would easily outweigh the annual fees.

    Still, owning it and paying the fee makes my skin crawl….

    • Sean Owen

      I suppose that’s a pretty good reason.

      I tend to stick to cash overseas, personally, to avoid that same odious fee, along with heightened identity theft risk.

      • for me, it depends on where in the world I’m going.

        Cash is king in many Latin countries where cards are accepted only in the high end places. Of course, ATMs carry their own odious fees so I’ll start carrying a large sum. It is very important that any cash you bring in be in pristine condition. No wear, tears or marks; even the smallest can cause a bill to be rejected by money changers.

        In places like Europe where cards are readily accepted, I tend to use them for all the reasons, except #7, you outlined for MTM. I have no interest or need for credit.

        • Sean Owen

          Well if you’re already retired and own your own place, you’re pretty much done, credit-rating-wise. An enviable position.

          For as long as you might need a new job, lease, or mortgage at some point, though, it’s best to mind your credit rating.

          • That’s true, but I am hoping to unload the house this spring.

            That said, I never paid a lick of attention to my credit score. Except for mortgages, never borrowed a dime. Always paid my bills and credit cards on time. Never carried a balance.

            Lenders continue to fall all over themselves trying to give me money.

            Maybe the world has changed, but I think this credit score obsession is marketing hype mostly.

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