There are lots of reasons you’ll hear me share as to why you should avoid credit cards. Nonetheless, I still find die-hard fans out there that hold on to their cards because they claim the credit card rewards and cash back programs are just too good to pass up. Let me give you three reasons I believe even the best credit card offers and the best credit card rewards aren’t worth it.
- Discipline – That’s a word you’ll see a lot around here. With cash, I have an emotional attachment to those funds and it hurts to hand the money to the cashier. With credit card processing machines, all I do is swipe. Research shows I will spend more money and spend it more often with even the best credit card. Rewards or not, this is something to consider.
- False Security – Credit card companies have long advocated the benefit of “purchase protection warranties” on purchases made with a credit card. These perks supposedly make it easier for you to dispute purchases when the merchant doesn’t cooperate. As an added benefit, some credit card companies will offer built-in extend warranties on certain purchases. I’ve never had a problem returning something when I played by the rules. Even though this may be a real benefit, how often is it used? I believe it just gives a little false security on a feature you won’t use.
- Pitfalls – I worked for a credit card company and can assure you there are pitfalls to having a credit card. I know that 29% interest rates exist. I know $35 late fees are coming if you miss a payment. I know payments get lost in the mail, credit scores go bad, terms change (never for the customer’s benefit), and lots of other bad things for you as a consumer. Cash keeps it piece-of-cake simple – you want something, you count out the right number of bills to pay for it.
Credit card rewards are a legitimate benefit, but are you going to play the system and win? Credit card companies make billions every year off of interest, late fees and other gotchas. I can’t argue that it is nice to get some “free” airline miles or hotel points, but those “free” perks may cost you a lot!