I began thinking about credit cards differently when I was 18 years old and my grandpa said to me "using a credit card is like taking out a mortgage on your clothes." And now, a short 10 years later, I can proudly say that I've never had a credit card (and I never will).
Here are the reasons why I hate credit cards:
1. I am a spender
I will certainly spend money I don't have if I use credit. I like clothes; I like nice things. I know myself, and I am acutely aware of my desire to spend. By using cash or debit (as credit), I am sure I don't spend more than I have.
Credit encourages overspending because you're given access to more capital than you actually have. This is very tempting!
2. Debt sucks
On one of his episodes, Dave Ramsey said, "if debt is an option, you'll always be in debt". I truly believe this, so I choose not to allow credit to be an option. Instead, I use an emergency fund to fund unexpected things.
3. Rewards aren't that great
For me, the rewards aren't worth the temptation. I think that if a company can suck you in because of their rewards, you're really at their mercy (not to mention they can change these rewards at any time). I want the control, not the company. Remember: they're in a business to make money, period.
4. Old habits die hard
Once you're in, it's hard to get out. I know this from student loan debt. I have a lot of debt from law school, and while it is going down, it's so hard to get out of. I don't ever want to do this again. And while my student debt is arguably worth it (maybe?), I could never justify consumer debt.
5. Compound interest
I love the Einstein quote: "Compound interest is the eighth wonder of the world. He who understands it, earns it... he who doesn't... pays it."
This means that if you invest your money, you earn compound interest, but if you use a credit card and carry a balance over to the next month, you'll pay compound interest.
Compound interest is interest calculated based on the previous period's principal and interest over time. The idea is that your money grows exponentially over time. Just like compound interest can benefit you, it can also hurt you if you use a credit card and carry a balance.
For more on your credit card and compound interest, see: Compound interest and Consumer Debt
6. My debit card is protected
Some say that using your debit card is risky. However, if you use your debit card as credit, it's not. If you use "credit" instead of "debit" when you swipe your debit card, the merchant charges your card as if it were a credit card, which then gives you all the protections that are given to credit card users. For example, my debit card is a Visa. If I use my debit card at the grocery store and choose credit, I'm afforded all the protections that all Visa credit card users are afforded. If I swipe it as debit, I only get the protections that my local bank offers. So, I use my debit card and choose "credit" for purchases.
8. Temptation
"But I pay off my card monthly." To that I say: I hope you always do! For me, it's too tempting and not worth the risk. And looking at the numbers, it's clearly too tempting for a lot of people.
9. The Stats
Average credit card debt in the U.S.: As of April 2014, the average American household has $15,191 in credit card debt. Even accounting for the swing in very indebted households, the average household owes $7,087 in credit card debt.
Source: Nerd Wallet
Likelihood of paying off debt monthly: 45% of people payoff their cards monthly. Meaning, 55% of American people carry a balance from month to month.
Source: Bankers Anonymous and CreditCards.com
Likelihood of overspending: According to a Dunn & Bradstreet study, people spend 12-18% more when using credit than when using cash. This alone beats any rewards program. And since credit card companies aren't paying me 12-18% in cash to use their card, it's not worth it for me.
Source: Investopedia
Article Source: http://EzineArticles.com/?expert=Natalie_Bacon
Article Source: http://EzineArticles.com/8557907
Here are the reasons why I hate credit cards:
1. I am a spender
I will certainly spend money I don't have if I use credit. I like clothes; I like nice things. I know myself, and I am acutely aware of my desire to spend. By using cash or debit (as credit), I am sure I don't spend more than I have.
Credit encourages overspending because you're given access to more capital than you actually have. This is very tempting!
2. Debt sucks
On one of his episodes, Dave Ramsey said, "if debt is an option, you'll always be in debt". I truly believe this, so I choose not to allow credit to be an option. Instead, I use an emergency fund to fund unexpected things.
3. Rewards aren't that great
For me, the rewards aren't worth the temptation. I think that if a company can suck you in because of their rewards, you're really at their mercy (not to mention they can change these rewards at any time). I want the control, not the company. Remember: they're in a business to make money, period.
4. Old habits die hard
Once you're in, it's hard to get out. I know this from student loan debt. I have a lot of debt from law school, and while it is going down, it's so hard to get out of. I don't ever want to do this again. And while my student debt is arguably worth it (maybe?), I could never justify consumer debt.
5. Compound interest
I love the Einstein quote: "Compound interest is the eighth wonder of the world. He who understands it, earns it... he who doesn't... pays it."
This means that if you invest your money, you earn compound interest, but if you use a credit card and carry a balance over to the next month, you'll pay compound interest.
Compound interest is interest calculated based on the previous period's principal and interest over time. The idea is that your money grows exponentially over time. Just like compound interest can benefit you, it can also hurt you if you use a credit card and carry a balance.
For more on your credit card and compound interest, see: Compound interest and Consumer Debt
6. My debit card is protected
Some say that using your debit card is risky. However, if you use your debit card as credit, it's not. If you use "credit" instead of "debit" when you swipe your debit card, the merchant charges your card as if it were a credit card, which then gives you all the protections that are given to credit card users. For example, my debit card is a Visa. If I use my debit card at the grocery store and choose credit, I'm afforded all the protections that all Visa credit card users are afforded. If I swipe it as debit, I only get the protections that my local bank offers. So, I use my debit card and choose "credit" for purchases.
8. Temptation
"But I pay off my card monthly." To that I say: I hope you always do! For me, it's too tempting and not worth the risk. And looking at the numbers, it's clearly too tempting for a lot of people.
9. The Stats
Average credit card debt in the U.S.: As of April 2014, the average American household has $15,191 in credit card debt. Even accounting for the swing in very indebted households, the average household owes $7,087 in credit card debt.
Source: Nerd Wallet
Likelihood of paying off debt monthly: 45% of people payoff their cards monthly. Meaning, 55% of American people carry a balance from month to month.
Source: Bankers Anonymous and CreditCards.com
Likelihood of overspending: According to a Dunn & Bradstreet study, people spend 12-18% more when using credit than when using cash. This alone beats any rewards program. And since credit card companies aren't paying me 12-18% in cash to use their card, it's not worth it for me.
Source: Investopedia
Article Source: http://EzineArticles.com/?expert=Natalie_Bacon
Article Source: http://EzineArticles.com/8557907
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