Tips For Using Credit Cards Responsibly: Advice from Nora Dunn

by guest on March 24, 2011

in Credit Cards

Using Credit Cards Responsibly

Nora Dunn is a former CFP who sold everything she owned, including her business, in 2006 to travel the world. While she’s never looked back and has been having a blast as a professional hobo ever since, Dunn still needs to travel in a financially sustainable manner.

A large part of her strategy? Using credit cards responsibly. I recently caught up with her during an internet-connected travel moment, and picked her brain about the practice of using credit cards in a way that makes good financial sense.

Tips For Using Credit Cards Responsibly: Advice from Nora Dunn

What Are Some Examples That Illustrate When Using Credit Cards Is A Good Idea?

First, using a credit card and paying it off in full each month helps you to build a great credit rating, which comes in handy when applying for loans and mortgages. The last time I took out a loan to buy a car, I received all sorts of special concessions and security deposit waivers by virtue of having an excellent credit rating.

Second, consistent credit card usage also can be handy for providing a good account of your spending habits. It’s considerably more traceable than paying with cash and wondering where all your money went at the end of the month.

However, my favorite reason for using credit cards (somewhat religiously) is for the accumulation of frequent flyer miles, which for me has been a way to reduce my full-time travel expenses drastically (and even experience a little business class treatment).

What Are Some Fees That People Should Watch Out For?

If you take out a cash advance with your credit card, interest accumulates from the day you withdraw the funds. This might come as a surprise if you’re expecting the same 20 plus day interest-free grace period that you receive on purchases.

Also, if you leave the country and buy things in foreign currencies, expect to pay a currency conversion commission of approximately two and a half percent. But if you know what to look for, you can find a credit card with no foreign transaction fee, and save a ton on travel.

What Should People Look For When Shopping For A New Credit Card?

What to look for in a new credit card depends on your needs. I like cards that have a rewards program of one sort or another, and my favorite type of reward is of the frequent flyer mile ilk (for obvious reasons). [Editor’s note: Take a look at our list of credit card benefits]

What Would You Say Are The Most Common Credit Card Mistakes People Make?

Carrying a balance on credit cards – especially high-interest department store cards – is one of the biggest mistakes you can make. I don’t consider my credit card a license to print money that I don’t have. Instead I use it in a similar manner to a debit card: only if there’s enough money in my bank account to cover the expense.

So There You Have It

Nora’s advice sounds an awful lot like the credit card gospel that I tend to preach, which makes me feel a lot better. At the end of the day, credit cards are tools to be used appropriately, and it always pays to respect their pitfalls.

Using credit cards as a convenience, to accumulate rewards, and to pay for travel expenses can save you a ton of money in the long run. But accumulating too much debt or not paying your bills on time can bring all those benefits crashing down around you.

This was a guest post written by Jake at Nerd Wallet. is a site dedicated to educating consumers about proper use of credit cards.

photo by Andres Rueda

© 2011 – 2013, guest. All rights reserved.

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{ 9 comments… read them below or add one }

1 Kristina Stewart

I like your idea of treating your credit cards as debit cards; it’s a way to avoid the piling up of debts. Some people who are up to their necks paying for credit card debts are usually those who spend more than they earn. If used correctly, credit cards provide many benefits and rewards.


2 Dave M

Good post!

I use my credit cards mainly for the rewards. I pay them off in full every month so it is like an interest free loan from the bank.

One thing I noticed is the banks really try to entice you to spend more. I can’t count how many times I get credit line increases on my cards. Of course the banks want to increase my credit line to encourage me to spend more than I can afford. Not going to happen with me!


3 Justin @ MoneyIsTheRoot

I have more than learned my lesson on credit card debt. In a way I still carry some, I have the cash to get out of credit card debt fully, but I also havent paid interest in probably a year and a half due to smart balance transfers (with zero fees!)…so I keep investing and making the minimum payment until it all comes due, then I will remove enough from my brokerage to pay it all off for good!

Thanks for the good read!


4 Jon | Free Money Wisdom

I’ve used credit cards for numerous purposes, mainly airline miles and hotel stays. Thanks again for another great post. I really liked your (and Nora’s) breakdown. Keep em’ coming!


5 sonya

I think credit cards are the devil and after school loans i thought best we break up. Now i’m in a better postion I’m reading all the information I can get to make me a more informed consumer. And your post was very informative.


6 krantcents

Thanks for the list of no foreign transaction fee credit cards! I use my cards for frequent flier miles to travel overseas so this was very handy.


7 JoeTaxpayer

“But Studies show you will spend more on credit cards than if you use cash, more than negating any benefit you might think you are getting.”
This line of reasoning is out there. Your readers should not fall for it. Unfortunately, the studies are slim to none. When you are actually presented with a real study, you’ll find there are indeed studies, if you can call them that. Contrived, university studies observing how students treat a $5 bill vs a gift card loaded with $5. This does not translate very well to Joe and Jane Taxpayer running thousands through their cards each month for normal expenditures.
One study from a government agency did, in fact, lead to a conclusion of substance, but they interpret the data differently. The study was the effect of card use when a perk was added. Their conclusion? Spending went up. Mine? When you add the right perk, for me, 2% cash into a 529 account, I’ll be sure to use the card instead of a check for any bill I can.
It’s not that data itself lies, just that interpretations differ.
For the record, the 529 account, funded solely with 2% back over the last dozen years had just passed $10,000. 7 years to college, 11 till graduation. This account will pay for a full semester, I’m expecting. And I’ll be writing about it, then.


8 Jake

Thanks for the note Joe. I have always thought that these “studies” were a bit dubious, but can never get a definitive answer. Actually, if you have any of these studies on hand, or links to them, I’d love to see them!

It’s amazing to me how things like this get into the public psyche and become urban legend, even though they were based on false data, bad science, and rumors from the beginning (see: the vaccine/autism debate).

And congrats on the 529 account – that Fidelity card really is amazing!


9 JoeTaxpayer

I appreciate your note, Jake, and if the link-blocking gods grant me kindness, you should enjoy both –
This article has a link to a Journal of Experimental Psychology, which cites a study that’s student based, as I alluded to above. To be fair, it’s interesting, and intuitive. I observe how my 12 year old will treat her cash allowance one way and a $25 Starbucks giftcard quite differently. It doesn’t extrapolate well to a husband/wife running all their expenses through the cards.
Next links to a study that was adult based. A lot of data, good sample size, etc, but I disagree with the conclusions. In fact I question whether a true study can ever exist. The observer effect would come into play and it carries more influence than the role of cards, in my opinion.
You cite autism. Excellent. My favorite is the coffee cancer correlation. It’s real, and significant. But easily explained away. The coffee drinking population happens to contain a far higher number of smokers than non coffee drinkers. To me this is obvious. To the brain surgeons producing the study, not no much. I make no judgment here of smokers, drinkers or statisticians. It just took another year to admit their error.

In the end, I accept that credit cards are to spendthrifts what alcohol is to the alcoholic. For those that can handle credit, the rewards are far higher than the risk. Before my daughter was born, the cards got me free travel, a nice TV, exercise equipment, stereo equipment, computer rebates, etc. I hope you enjoy the two “studies” I linked.


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