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Is it OK to use credit cards if you pay off the balance each month?
By Anita |
A lot of people use credit cards so they can earn “rewards” from the credit card company, such as rebates, frequent flyer miles, etc. They pay off the balance each month and think this is OK.
If you do this, consider:
1.) When you do this you spend more money, even if you pay off your balance. Dun & Bradstreet studied this and found that people spend 12-18 percent more when they pay with a credit card instead of cash. As Dave Ramsey says, “there is no responsible use of credit cards. You will spend more if you use credit cards. Even by paying the bills on time, you are not beating the system!”
2.) The credit card companies make money off of you even when you pay off the balance and never pay interest. They make the money from the fee the merchant has to pay to them for your transaction. This applies to debit cards too.
Think about what credit card companies do with the money they make from you. They use it to prey on the poor. They intentionally seek out weak customers and give them credit cards. See my post about the documentary Maxed Out for further information about this. This reason alone is why I curtail even my use of debit cards. I use cash as much as possible when in a store and pay bills online from my checking account.
I love the simplicity of a cash transaction. The only person that profits from it is the merchant. No fees. It’s nice and straight-forward.
3.) It’s one more bill hanging over your head. If you’re one day late with a payment there are late fees. And sometimes a false charge will appear on your statement and you have to sort that out. Long term use of a credit card involves some sort of hassle down the road, even if you pay off the balance every month.
4.) About those “rewards,” Dave Ramsey says, “I have met with thousands of millionaires in my years as a financial counselor, and I have never met one who said he made it all with Discover card bonus points. They all lived on less than they made and spent only when they had cash. No payments.”
If you haven’t ever tried a cash-based approach to store purchases, I encourage you to get a copy of our free Expense Tracker form by signing up for our e-mail list. We give you instruction on how to use the form.
Topics: Credit Cards, Debit Cards |
May 30th, 2008 at 1:09 pm
I have started to think credit cards are a cancer. Our relationship with credit card companies is sick. I’m with Dave Ramsey on this 100%.
I’m in a debt program to pay off my debt and I’ve gotten used to paying cash for everything.
It’s made me a better person…