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The Truth About Credit Cards – Part One


I’m going to make some of you mad.  That’s okay, I’ve done it before. HA!  I’ve long been a proponent of using cash instead of using credit cardsI’m not very fond of plastic – I really only use my debit card to buy gas and to pay for things online. I don’t even have a credit card anymore – period.  Am I afraid to carry cash? No. On a good day, a robber might get $300 from me.  I usually only have $50 or less on hand, so I suspect I’m not a very attractive target.

Today I want to spend some time debunking several credit card myths – lies you’ve been told from the credit card industry (or your FAMILY). It is not true that you NEED a credit card to live. The only reason you need to establish credit is so that you can BORROW MORE MONEY! Is that really where you want to be?

Myth 1: I need a credit card for an emergency.

You do not need a credit card for emergencies…you need an emergency fund. Studies show that if you have that credit card, you’re going to use it. Also, you’ll spend more. Having a cash emergency fund causes you to be a bit more creative (aka – cheap) when it comes to dealing with “emergencies.” If your water heater goes out, you might buy a NEW one with a credit card…but if you were paying cash, you might ask if there was a scratch and dent available…or GASP, a used model.

Myth 2: I deserve it.

You what? You deserve what? If God gave us what we DESERVED we’d be in ROUGH shape. You don’t deserve much of anything. Work hard for it. Pay cash. When you can pay for it is when you deserve it.  End of story.

Myth 3: The rewards are too good to pass up!

Play with this myth and you will lose.  Credit card companies are multi-billion dollar businesses. These rewards won’t make you rich but one slip-up and you could be in a mess. You can do without those “rewards.” And if you don’t think that’s enough of an argument, how about switching to a debit card that also offers rewards – like Perk Street?

Myth 4: I can afford it.

Can you pay for that all at one time? No? Then you can’t afford it. Society has bought into the belief that being able to afford the payments is the same thing as being able to afford to buy, buy, buy.  If you’re making payments, you really couldn’t afford it. End of story. Use cash…oh wait, did I already say that?

Myth 5: I pay it off every month.

Good for you.  Then why are you using a credit card? Using a credit card causes you to spend more. It’s a fact. So, you’re spending more needlessly.  I talk to so many people who have this mindset.  Then they lose their job, get sick, or something unforeseen happens. BAM! They can no longer pay that card off. So the amount owed grows – the fees and penalties add up. I worked in the credit card industry and saw this all the time.

If this post made you mad, be sure to come back tomorrow for another. ;0)

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  1. Summer Whelchel

    I agree with you on every point, that these are the traps people fall into. One thing I disagree with for us personally, though. We do use two rewards cards: Capital One and Choice Privileges. With the first we use it for my husband’s business travel expenses, which we get reimbursed for every month and we pay the entire balance off – this builds airline miles for us that we use periodically and are allowing to pile up for us to use on a family vacation in 2014 that we have been planning for many years. The second we use like a checking account or a debit card, and pay the entire balance off every month, using it for household expenses and utility bills – this one builds free hotel points and we NEVER EVER pay for a hotel, and some of our trips have been quite lengthy when we are traveling for my daughter’s music career. I am not saying it is a fail-proof system, and we have to be wise stewards of this – I will admit a time or two we have gone over budgets and spent a couple months catching back up! We are middle-class America and don’t make very much money, so it’s not like I believe we “can afford it” and so just spend, spend, spend. But I am saying that it CAN be done, and that these rewards do benefit us quite nicely, as long as we don’t overspend.

    I still agree with you wholeheartedly, that these are ways to easily get trapped in the whole credit card scenario…and I will still tune in tomorrow as always. :-)

    1. Barry

      Hey Summer, thanks for your comment. Tomorrow’s post addresses this a bit more directly, but statistics show you will always spend more on plastic than with cash and there is risk of “getting bitten” if/when something goes wrong. That said, for years I had two credit cards that I used religiously – one for hotel points and the other for airline miles (like you). Then I started really tracking my spending and found that I really was spending more when I used them. I can’t argue with your system of buying and paying it off every month as long as it works for you, but I can tell you I’ve counseled dozens of families who had this habit go terribly wrong when something unexpected occurred and I’ve talked to many more who stopped using the cards and learned they were better able to stretch their dollars because they were watching more closely.

  2. Kerrie

    I cut up all our credit cards 2 years ago and paid them all off in 18 months. I can still rent a car, purchase airline tickets, rent a hotel room, etc. with out a credit card. I was always told I needed a credit card to do all of these things! Oh yes and I was told recently that I needed a credit card to pay a tow truck if my car ever breaks down. False!

    1. Barry

      Way to go, Kerrie! Good for you.

  3. Kori

    Hey Barry,

    Thanks for such great insight on your articles! They are great! On thing, if someone disagrees with you, well just encourage them to try it for a year. Funny, how things might sound from them after that year?!?!?!?

  4. Summer

    Thank you, Berry, for your respectful reply. I did read today’s as well. Very good words!

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