For years of my life I swallowed that large Dave Ramsey pill. I’m not going to lie, I learned how to budget, build up an emergency fund, started saving for retirement, and we began slowly working our way out of debt.
His practical, common sense advice worked wonders for my broke and desperate lifestyle, and those results led me to believe that anything that came out of his mouth was golden. Despite having great tips on getting out of debt and giving people principles and the foundation that will lead to wealth, I eventually realized that not everything he said is true.
One of the biggest axes he tries to grind is the notion that credit cards are bad. He blasts credit card companies on the air, begs people to cancel and cut up their credit cards despite the fact that canceling a card can hurt your credit, and encourages people to never use them again in their life.
With such a strong opinions on the matter from Dave and other debt-free advocates, many people wonder, are credit cards really that bad?
Saying that credit cards or credit card companies are bad is like saying that guns, the mortgage industry, and fast food restaurants are bad.
In the reality of all of these examples, those things aren’t bad…it’s the people that use them and the events that spur from them that make them evil. I own a gun, a few of them in fact, and that thing can sit in it’s case all year long and never hurt a soul. It doesn’t even have the ability to look at you wrong and hurt your feelings!
The mortgage industry got a terrible name in light of the 2008 housing debacle, but was it really all their fault? Not in my opinion! Sure, they can share some of the blame for being greedy, but ultimately it’s up to the consumer to make a decision that’s right for them and figure out how much house they can realistically afford.
Fast food restaurants are the bane of many peoples’ existence and are a major contributor to diabetes, people that are overweight, and the rising death totals for their ever-loving customers. But is it really the fast food industries fault for creating a product and a business model that thrives? Is it their fault that people live busy lives, don’t take the time to cook meals on their own, and don’t educate themselves on how to eat properly? I think not.
Just as with these other examples, credit cards aren’t bad either. It’s the ignorant people that use them: the families that don’t know how to live below their means, the ones that rely on debt as a means to get by each month, and the people that don’t pay off the monthly card balance that create the stigma that credit cards are somehow bad. I’m not trying to bash anybody here as I was one that abused credit cards for many years, got behind on my payments, and had to deal with collectors and repercussions that come when you borrow more than you can afford.
Here at the WSL household we sport a cash-based system for most of our monthly living expenses such as groceries, hygiene products, eating out, and a few other categories. However, we own 4 credit cards.
Granted, we don’t use them as often as some people do, but we aren’t crazy enough to think that credit cards are bad and therefore spurn all of the great rewards that credit cards offer. I currently have one card that gives me 5% back on particular categories each quarter, and you can be certain I’ll be using that card if I’ll be spending money within any of those categories. For instance, this quarter the 5% rewards were for gas and restaurant purchases; well, I will be spending somewhere around $1,000 on dinner seminars later this month and I’d be crazy to pass up the $50 free dollars they’re going to give me.
Another credit card I recently applied for offered $400 in cash back if you’re able to spend $3,000 over a 3-month period. Thank you Chase, I appreciate your generosity. The money was spent within the first few weeks on some large purchases that I had to make and now we’ll be buying a new washer thanks to those kind folks.
Furthermore, I’ve had many people sign up for balance transfer cards as a way to pay down their debt more quickly. How can transferring your balance on a credit card be bad when they’re offering 0% for 15 or 18 months while your current rate sits at 12% or 20%? Even with the 3% balance transfer fee, you’re coming out 9% ahead!
Despite saying all of this, I also know that a lot of people out there shouldn’t touch a credit card. If you’re struggling to pay your monthly bills, don’t have an emergency fund, or have a shopping addiction, then a credit card may mean bad news for you. People who pay with credit spend 16-18% more than those paying with cash. So, even if you have a credit card, pay off the balance each month, and think you’re working the system, there is still a chance the credit card companies are one-upping you.
Do you think credit cards are bad? Do you use them for every purchase you make or only when they’re offering great bonuses like the 5% cash back categories?
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