Monday, October 6, 2014

Why We Don't Push Credit Cards

We wanted to make sure we were very clear with the 3-4 readers we're lucky enough to have. I know we've spent the last few weeks talking about all the ways we've been using our credit cards to generate cash rebates and travel rewards. However...

1. We are NOT advocating anyone open up a bunch of credit cards.
2. We have NO financial incentive nor any personal interest in you opening up credit cards.
3. My family is only explaining what we do, which is NOT the same thing as suggesting you follow us.

As we've always said, reward credit cards can be great tools to use if you're financially stable and disciplined. Paying off your balance at the end of each month is an absolute must. Otherwise, the amount you're paying in interest (ranging from 19-29% APR) will far exceed any travel rewards you're earning. But they're simply not for everyone. Plus, remember our #1 rule - Never spend any more than you would normally.

My father actually teaches a Personal Finance 101 course that espouses the dangers of having credit cards in the wrong hands. With so many young people graduating with a ton of student debt, giving them access to credit cards will likely lead them down a bad financial path. They should be paying off their student loans and funding their savings, not generating credit card spend.

Yes, when used properly, reward credit cards can help you enjoy your life and have more fun. But someone could make a similar argument for handguns. They're both not intended to hurt people, but let's be honest. They can, and they do.

It's common knowledge that people spend more when they use credit cards than cash. It's much easier to quickly swipe a plastic card than to find an ATM and pull out cash.

It's also well understood that the Banks are far from non-profit organizations. They make billions of dollars from all the credit card users that can't pay their bill in full as well as the small businesses who have to fork over their profit to cover card processing fees.

And even if you start out financially disciplined, it may not always stay that way. If something sudden were to happen (loss of a job, unexpected medical bills, failing business, surprise home expense, etc,) then most people will start to run up credit card debt to help ease the cash outflow. Guess what happens after that.

Please, please, please. Be careful with credit cards. If anyone were to get into financial distress because of our blog, I'd lose a lot of sleep from the guilt.

No comments:

Post a Comment